A bipartisan stablecoin bill, known as the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), was approved by the U.S. Senate Banking Committee on Thursday, positioning it for a vote in the Senate in the coming weeks. The bill is intended to regulate stablecoins, digital assets pegged to stable assets such as the U.S. dollar or gold, marking the first federal regulatory framework for the $228 billion stablecoin industry.
Supporters Praise Regulatory Clarity
The bill has received backing from industry leaders like Jeremy Allaire, CEO of Circle, which issues the USDC stablecoin. Allaire called the legislation “a huge step towards providing regulatory clarity for stablecoins,” adding that it could also help make the U.S. dollar more competitive globally.
“We are at a pivotal moment for the payments industry, where stablecoins are transitioning from a niche experiment to a central element in global payments,” said Peter Marton, former Deputy Superintendent of Virtual Currency at the New York Department of Financial Services. Marton further stated that stablecoins are set to become a core strategy for banks in the near future, regardless of whether they’re prepared for it.
Critics Warn of Potential Risks
However, the GENIUS Act has sparked opposition from watchdog groups and some lawmakers who argue that it could pave the way for “crypto abuse” and corporate overreach. Public Citizen, a financial policy advocacy group, expressed concern that the bill could lead to increased risks of price manipulation, coin failures, and the use of cryptocurrencies in illicit financial activities.
Bartlett Naylor, financial policy advocate at Public Citizen, stated, “If the GENIUS Act becomes law, price manipulations, coin failures, and use of cryptocurrencies in illicit finance will increase.”
The watchdog group also raised alarms about how the bill could allow major corporations, including Walmart, Meta, and X, to enter the banking sector. Without specific provisions under the Banking Holding Company Act, the bill may enable non-financial firms to offer financial services, which could lead to greater corporate influence in the financial system.
Concerns from Lawmakers
Senator Elizabeth Warren (D-MA) echoed these concerns, warning that the bill could allow companies like Elon Musk’s X (formerly Twitter) to issue their own stablecoins without proper safeguards to protect consumers, national security, and financial stability.
Warren expressed her fear that the legislation could “clear the decks for Elon to issue X Money as his own stablecoin,” bypassing necessary consumer protections.
A Divisive Issue
The debate surrounding the GENIUS Act underscores the tension between fostering innovation in the financial sector and ensuring adequate safeguards against corporate dominance and financial instability. While supporters argue that the bill is a crucial step toward integrating stablecoins into the mainstream financial system, critics warn that it may create more risks than it mitigates.
As the bill moves closer to a Senate vote, it remains to be seen how lawmakers will address these concerns and whether additional protections will be added to the legislation.
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