In mid-March the US Senate’s Bill to regulate stablecoins, the Genius Act, was passed by the Senate Banking Committee with an 18 to 6 vote, with at least five Democrats supporting the Bill. Last week Republicans announced that Senate Majority Leader John Thune would propose a vote on the Bill to the full Senate, possibly this week. However, over the weekend a group of nine pro-crypto Democrats have said they could not support the Bill in its current form, Politico first reported.
There’s an updated version of the Bill that hasn’t yet been published, and the Democrats are not happy with it. Four of the five Democrats that voted for the Bill at the committee level signed this weekend’s letter.
The letter states that the Bill needs “stronger provisions on anti-money laundering, foreign issuers, national security, preserving the safety and soundness of our financial system, and accountability for those who don’t meet the act’s requirements. While we are eager to continue working with our colleagues to address these issues, we would be unable to vote for cloture should the current version of the bill come to the floor.”
Cloture refers to agreeing to avoid endless debate on the Bill, and requires 60 votes, whereas the Republicans have only 53 Senate members, so they need Democrat support.
The five Democrats that voted for the Bill in committee were Senators Alsobrooks, Gallego, Kim, Rochester and Warner. Only Alsobrooks didn’t sign the letter. She is a co-sponsor of the Bill alongside fellow Democrat Kirsten Gillibrand, who is not on the Banking Committee.
Axios previously reported that Senate Minority Leader Chuck Schumer had cautioned Senators not to commit to the Bill so they could have leverage for amendments.
Trump family activities don’t make it easier
Various crypto activities launched by entities affiliated with the Trump family have muddied the waters. Shortly after the Genius Act passed out of committee, Trump-backed World Liberty Financial unveiled plans to launch a stablecoin, USD1.
Last week during an event in Dubai, the company announced that the stablecoin would be used by Abu Dhabi’s MGX to pay the $2 billion it planned to invest in the Binance crypto exchange. A quick browse of cryptocurrency transactions confirms that the payment has happened. MGX’s Chairman is HH Sheikh Tahnoon Bin Zayed Al Nahyan, who has been National Security Adviser of the UAE since 2016 and is the brother of the UAE President. Given the government affiliations of MGX, the optics are problematic.
World Liberty Financial’s CEO Zach Witkoff is the son of Steven Witkoff, the US Special Envoy to the Middle East. The CEO announced the $2 billion transaction on stage alongside the President’s son, Eric Trump.
This is not the first transaction to raise eyebrows. The largest financial benefit came from the issue of the $TRUMP memecoin before the Presidential inauguration. Last week the project announced that large memecoin holders will get to have dinner with the President and some will receive a White House tour. CNBC reported that Republican Senator and Trump supporter Cynthia Lummis observed, “This is my President that we’re talking about, but I am willing to say that this gives me pause.”
At the other end of the political spectrum is Democrat Senator Warren. She said of the USD1 stablecoin transaction in the context of the Genius Act, “This is corruption and no senator should support it.”
A week ago it looked like the United States soon might get some regulatory clarity on stablecoins. Now it appears there will be some going back to the drawing board.
