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The U.S. Senate made significant progress on Monday, May 19, by voting to advance the GENIUS Act, a pivotal bill aimed at establishing a regulatory framework for stablecoins. The bill passed with a bipartisan vote of 66-32, allowing it to move to the next stage for full debate and potential amendments on the Senate floor.

What is the GENIUS Act?

Introduced by Sen. Bill Hagerty (R-TN), the GENIUS Act outlines comprehensive regulations for stablecoin issuers. The bill mandates that issuers maintain full reserves in U.S. dollars or highly liquid assets, undergo regular audits, and adhere to stricter guidelines for issuing more than $50 billion worth of tokens. It also includes provisions for overseeing foreign issuers to mitigate financial risks and prevent misuse of stablecoins.

Overcoming Initial Opposition

Just two weeks ago, on May 8, the bill faced a setback when a similar vote failed narrowly with a 48-49 result. Concerns raised by several Democrats included insufficient consumer protections, lack of accountability for corporate issuers, and ethical exclusions related to political figures, including former President Donald Trump. Trump has ties to World Liberty Financial, a group involved in launching a dollar-pegged stablecoin.

However, recent negotiations led to significant changes that swayed opinions. Key concessions were made to enhance consumer protections and impose stricter ethical standards on “regular and special government employees.” Notably, these amendments now include figures like Elon Musk but continue to exempt Trump, which has drawn criticism from some lawmakers.

Democrats Shift Stance

Several Democrats who initially opposed the bill, including Sens. Ruben Gallego (D-AZ), Mark Warner (D-VA), Lisa Blunt Rochester (D-PA), Angela Alsobrooks (D-MD), and Kirsten Gillibrand (D-NY), reversed their positions during Monday’s vote. This shift reflects the influence of behind-the-scenes negotiations and the importance of bipartisan cooperation in advancing financial regulation.

What’s Next for the GENIUS Act?

The Senate Banking Committee had previously approved the GENIUS Act on March 13 with bipartisan support. Although the bill no longer includes Democratic sponsors in its current form, it has gained momentum across both parties. If the bill passes the final Senate vote, it will establish one of the most comprehensive federal frameworks for stablecoin regulation in the United States.

Key Features of the GENIUS Act:

  • Full reserve requirements in U.S. dollars or highly liquid assets for stablecoin issuers.
  • Mandatory regular audits to ensure compliance and transparency.
  • Stricter oversight for issuers managing over $50 billion in stablecoin tokens.
  • Provisions to regulate foreign issuers and limit financial risks.
  • Enhanced consumer protections and ethical guidelines for government employees.

As the final vote on the GENIUS Act approaches, its passage could mark a transformative step in the U.S. financial landscape by providing regulatory clarity for the growing stablecoin market. This development is critical for fostering innovation while ensuring security and accountability in the cryptocurrency space.

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