Senate Passes Stablecoin Bill in Big Win for Crypto Industry — WSJ

By Amrith RamkumarThe Senate passed legislation to regulate a widely used type of cryptocurrency, a key victory for the digital-asset industry after it poured money into last year's election.The bill, the first of its kind to put federal guardrails on digital currencies, sets up oversight of stablecoins, a popular crypto asset typically pegged to a fiat currency such as the U.S. dollar. That peg keeps their price steady, making them attractive to traders looking for a store of value while they buy and sell more volatile cryptocurrencies. Stablecoins can also be used for cross-border payments.Known as the Genius Act, the bill passed the Senate 68-30. It now moves to the House, where passage is viewed in Washington as likely but could take time. President Trump has said he wants to sign stablecoin legislation before Congress's August recess.The roughly $240 billion stablecoin market is expected to surge in the coming years, with financial-industry titans such as Visa and Mastercard getting into the sector, attracted in part by the prospect of regulatory certainty created by the bill. Amazon.com and Walmart are among the big companies also exploring stablecoins.Many Democrats got on board with the GOP-led effort after strengthening consumer protections and national-security provisions. Supporters of the bill argued that doing nothing would push the industry offshore and lead to more nefarious activity."I think crypto is here to stay and I'd rather have it be American led," Sen. Mark Warner (D., Va.), who supported the bill, said in an interview.The Senate passage is a big win for Circle, the largest U.S.-based stablecoin issuer, which recently went public. Circle has argued for regulations to legitimize the industry and in part to hurt Tether, its main rival and the biggest player globally. Tether is based overseas and hasn't shown it can meet the standards outlined in the bill. Tether didn't immediately respond to a request for comment.The crypto industry became a bigger player in Washington after companies and executives donated more than $170 million to three super PACs last year and made inroads with Trump, whose family's crypto business has its own stablecoin.The bill divided Democrats. Warner and other moderate lawmakers said it was worth passing legislation to establish at least some guardrails on the industry, but advocates for tighter regulation such as Elizabeth Warren (D., Mass.) opposed the bill, arguing it puts consumers at risk."The Genius Act lacks the basic safeguards necessary to ensure that stablecoins don't blow up our entire financial system," Warren said.More moderate members of the party including Warner and bill co-sponsor Sen. Kirsten Gillibrand (D., N.Y.) got behind it after tweaks made it harder for some nonfinancial companies to issue stablecoins, and lawmakers tightened requirements for foreign stablecoin companies such as Tether. The lead sponsor was Trump ally Sen. Bill Hagerty (R., Tenn.).The bill prohibits executive branch officials and lawmakers from issuing stablecoins, in part to address concerns about conflicts of interest created by Trump's crypto ventures. It isn't clear how that would affect the Trump family's World Liberty Financial crypto firm because regulators would have to interpret the company's ownership structure.Launched in September, World Liberty Financial came out with its own stablecoin earlier this year.The bill mandates that regulators supervise issuers of large stablecoins in some of the same ways they regulate banks. Stablecoin issuers would need to comply with anti-money-laundering rules and sanctions, to help ensure they aren't used by criminals.The bill requires issuers to hold $1 of reserves, such as cash or Treasury bills, for every $1 of stablecoins. Major stablecoins with more than $50 billion of tokens in circulation would be required to publish audited financial statements.Write to Amrith Ramkumar at [email protected]