By Key Points
- US Senate blocks the GENIUS Act, halting stablecoin regulation progress.
- Key Democrats who once supported the bill voted against it.
- Lawmakers cite weak AML and oversight provisions as dealbreakers.
- A revised version of the bill now targets foreign issuers like Tether.
The highly anticipated GENIUS Act, a bipartisan bill aimed at regulating stablecoins in the US, hit a major roadblock in the Senate this week. Once seen as a breakthrough toward regulatory clarity, the bill failed to advance after 49 Democrat senators voted against it, stalling its progress indefinitely.
What made the vote surprising was that many of those Democrats—including Ruben Gallego, Mark Warner, Kirsten Gillibrand, and Angela Alsobrooks—were previously either supporters or co-sponsors of the bill. Their sudden reversal signals a deep divide over how stablecoins should be regulated, even among lawmakers who generally support crypto innovation.
In a joint statement, these Democrats said the bill didn’t go far enough to protect the financial system. Their primary concerns? Weak anti-money laundering (AML) enforcement, lack of oversight for foreign stablecoin issuers, and insufficient regulatory power to ensure market integrity. They emphasized that without these critical protections, the legislation could leave consumers vulnerable and the system open to exploitation.
“We recognize that the absence of regulation leaves consumers unprotected… but improvements must be made,” the group stated.
Republicans, who voted unanimously in favor of the bill, accused Democrats of putting politics over progress. Senator Pete Ricketts voiced frustration over the stalled vote. At the same time, Bo Hines, executive director of the President’s Council of Advisers on Digital Assets, said Democrats missed a vital opportunity to lead in fintech.
“This bill wasn’t about politics—it was about modernization and leadership,” Hines wrote on X. “Instead, Democrats caved to fringe ideological factions.”
Today, Senate Democrats made a deliberate choice to play partisan games rather than do what’s right for the American people. By blocking the GENIUS Act from advancing, they failed to implement the kind of common-sense regulations that would have solidified America’s leadership in…
— Bo Hines (@BoHines47) May 8, 2025
Bitwise CIO Matt Hougan also warned that regulatory uncertainty could slow stablecoin adoption and hurt the broader crypto market. Without clear guidance, altcoins may see increased volatility, especially during the upcoming summer months—a fear echoed by analysts watching trends in Bitcoin dominance.
If stablecoin and market structure legislation grind to a halt in DC, it’s going to be a long summer for non-bitcoin crypto assets.
— Matt Hougan (@Matt_Hougan) May 6, 2025
New GENIUS Act Draft Targets Foreign Issuers Like Tether
Just days after the failed vote, an updated version of the GENIUS Act emerged—this time with noticeable changes aimed at satisfying critics.
The revised draft scales back its list of supporters to a core group of Republicans, including Senators Bill Hagerty, Cynthia Lummis, Tim Scott, and Dan Sullivan. Notably, Democrats Kristen Gillibrand and Angela Alsobrooks were removed from the bill’s sponsor list.
Most importantly, the new draft includes expanded regulatory authority to cover foreign stablecoin issuers that operate in the US, such as Tether. It also provides clearer definitions for what qualifies as a digital asset service provider and updates the list of approved backing assets for stablecoins.
These changes suggest that lawmakers are trying to find a balance between innovation and regulation, without making the bill too lenient or overly restrictive.
Tether CEO Paolo Ardoino responded positively to the revisions. He welcomed the effort to introduce constructive regulation and said that a clear legal framework could strengthen the role of the US dollar globally.
“We look forward to continued engagement with US policymakers,” Ardoino said. “We believe strong, thoughtful regulation can support global dollar hegemony.”
If stablecoin and market structure legislation grind to a halt in DC, it’s going to be a long summer for non-bitcoin crypto assets.
— Matt Hougan (@Matt_Hougan) May 6, 2025
Despite the positive tone, the path ahead for the GENIUS Act remains uncertain. While the new version may gain traction among Republican lawmakers, it still needs bipartisan support to pass in the Senate.
With Democrats calling for even tougher regulations and Republicans pushing for swift action, the stablecoin industry remains stuck in a regulatory limbo. For now, the US market continues to operate without a comprehensive framework, leaving users, issuers, and investors in a state of uncertainty.
Ripple Effect on the Crypto Market and Legislative Trends
The GENIUS Act’s failure is part of a broader pattern of crypto-related legislation struggling to gain consensus in Washington. Political pressure and ideological rifts continue to stall promising crypto bills—causing ripple effects across the entire market.
In recent weeks, we’ve seen similar concerns raised in other high-profile events. The Trump XRP scandal has drawn attention to regulatory favoritism, while the Arizona Bitcoin Reserve Fund reflects growing state-level support for Bitcoin despite federal gridlock.
Meanwhile, crypto market participants aren’t waiting for Washington. Some, like high-stakes traders, are finding massive success amid the chaos. A Hyperliquid trader recently turned a $46M profit using Bitcoin and meme coins—highlighting how much of the market still operates beyond regulatory reach.
On the institutional front, Bitcoin ETF inflows show strong appetite for regulated exposure to digital assets. These inflows suggest that investors still believe in crypto’s long-term value, but they also underline the urgent need for updated, clear policy—like the kind the GENIUS Act aimed to offer.
Until lawmakers reach alignment, the regulatory gap will remain a critical pain point for both innovation and investor protection in the US crypto space.
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