The Senate voted to advance the GENIUS Act with a vote of 66-22 on Monday night, a bill aimed at regulating certain types of cryptocurrency.
The bill has faced some opposition from Democratic Party members in recent weeks due to former President Donald Trump's cryptocurrency-related activities, but ultimately received support from 16 Democratic senators, including Senator Cory Booker (D-N.J.) and Senator Adam Schiff (D-Calif.).
This measure, supported by the cryptocurrency industry, establishes regulations targeting stablecoins – a type of cryptocurrency pegged to another asset, usually the US dollar.
Supporters hail this bill as a means to protect consumers and establish standards for the industry, which could help this cryptocurrency become a mainstream digital payment tool and used in other financial instruments.
However, critics warn that the bill does not address concerns about conflicts of interest, as in Trump's case, and that it could endanger consumers as well as the broader economy due to a lack of sufficiently strong regulations.
"This lays the groundwork for these assets to become mainstream," Christian Catalini – founder of the Cryptocurrency Economics Lab at MIT, a supporter of this measure – said in a statement to ABC News.
The GENIUS Act relates to the issuance and exchange of stablecoins – a type of digital currency backed by another currency like the US dollar or a commodity like gold.
Stablecoins are designed to be less volatile than other types of cryptocurrency, which can experience significant price fluctuations, making it difficult for users to buy and sell.
The bill establishes regulations for stablecoin issuers, including requiring companies to hold a reserve of assets backing that cryptocurrency. This regulation aims to protect consumers from the risk of being unable to withdraw funds in the event of a mass sell-off.
In a separate effort to protect consumers, the bill also requires issuers to prioritize refunds to stablecoin holders if the company goes bankrupt. The bill also mandates that issuers comply with certain anti-money laundering and anti-terrorism regulations.
Supporters of the GENIUS Act hail it as the first effort to legitimize an important area of the cryptocurrency industry, providing consumer protections, enabling traditional financial institutions to participate, and expanding the digital currency market.
"This opens the door wide," Catalini said. "You will see many issuers get involved. Consumers will have more choices. This will drive competition and innovation in the payments sector."
Catalini added that the new regulations help consumers no longer have to distinguish between reputable and non-reputable organizations; instead, companies will compete based on the quality of products and services.
"The game now will be: who can provide better features and experiences for consumers and businesses the fastest," he said.
However, opponents argue that this bill is a weak, industry-friendly set of regulations that is insufficient to protect consumers and oversee illegal transaction activities related to stablecoins.
"While a strong stablecoin bill is the best possible outcome, a weak bill like this is worse than nothing," Senator Elizabeth Warren (D-Mass.) stated in the Senate on Monday.
Critics argue that the weaknesses of the bill are evident in that it does not address concerns about conflicts of interest in Trump's stablecoin-related activities.
In March, the cryptocurrency company World Liberty Financial, backed by Trump, issued a stablecoin called USD1. Earlier this month, an Abu Dhabi-based investment firm used this stablecoin to invest $2 billion in the cryptocurrency exchange Binance, positioning Trump's company to potentially profit from that deal. Trump has denied any wrongdoing.
The bill includes a provision that "prohibits any member of Congress or high-ranking executive branch official from issuing stablecoin products while in office."
However, Warren argues that the bill is still not sufficient to prevent issues arising from Trump's activities.
"This bill even creates additional opportunities to reward buyers of Trump's coin with perks like tax exemptions, pardons, and positions in government," Warren added.
