Senate Democrats dealt a significant blow to cryptocurrency regulation efforts Thursday by blocking the GENIUS Act, a bipartisan stablecoin bill, prompting sharp criticism from Treasury Secretary Scott Bessent.
The legislation, which fell short with a 48-49 vote against the required 60-vote threshold, would have established comprehensive federal oversight for payment stablecoins. The bill, sponsored by Senators Bill Hagerty, Tim Scott, Kirsten Gillibrand, and Cynthia Lummis, aimed to create a regulatory framework allowing stablecoins to be issued by insured depository institutions or qualified state entities.
“The world needs American leadership for stablecoins and digital assets to flourish globally,” Bessent stated on X, expressing frustration over what he termed a missed opportunity. He emphasized that without federal legislation, the industry would face fragmented state-level regulations, potentially hampering growth and
competitiveness.
The proposed legislation included stringent requirements for issuers, including maintaining full reserves in US dollars or short-term Treasury securities, monthly public disclosure of reserve
compositions, and mandatory audits for entities exceeding $50 billion in market capitalization.
The bill’s defeat came after Democratic support eroded over the weekend when Republican leadership attempted to expedite the voting process. Democrats criticized the move as premature, citing concerns about insufficient provisions for anti-money laundering and national security measures.
Senate Majority Leader John Thune, who strategically changed his vote to preserve the option of reintroducing the measure, indicated willingness to modify the legislation to address Democratic concerns. However, he questioned whether the opposition was genuinely about the bill’s content or politically motivated to deny Republicans and President Trump a bipartisan achievement.
Adding complexity to the situation, Senators Elizabeth Warren and Jeff Merkley raised ethical concerns regarding President Trump’s potential cryptocurrency connections. In a May 5 letter to the Office of Government Ethics, they highlighted concerns about Trump’s alleged ties to a UAE state-backed firm MGX, Binance exchange, and World Liberty Financial’s USD1 stablecoin project.
The senators specifically questioned a reported $2 billion investment plan involving these entities, suggesting possible violations of the Constitution’s Emoluments Clause and federal bribery laws. They expressed particular concern about the potential for foreign influence and self-enrichment through the stablecoin venture.
The timing of these concerns coincided with Trump’s recent
high-profile fundraising events, including a $1.5 million-per-plate dinner at his Virginia golf club and a $1 million-per-plate fundraiser for the MAGA super PAC.
Republican legislators expressed frustration with the Democratic position, arguing that months of collaborative work and incorporation of Democratic feedback had gone into crafting the legislation. Thune particularly emphasized the shifting nature of Democratic demands, suggesting political motivations might be overshadowing policy considerations.
The failure to advance the GENIUS Act represents a setback for efforts to establish federal oversight of the growing stablecoin sector, leaving the industry subject to varying state regulations rather than a unified national framework. Bessent warned that while American lawmakers delay, global competitors continue to advance in the digital asset space, potentially diminishing U.S. influence in financial innovation.