The U.S. Senate Banking Committee has approved the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, a bipartisan bill aimed at creating a regulatory framework for stablecoin issuers. The legislation seeks to expand the use of stablecoins beyond cryptocurrency trading and into broader payment applications. However, concerns have emerged over potential risks to the U.S. dollar, including fears of privatization and de-dollarization.
The bill permits stablecoin issuers to operate outside the same federal consumer financial protection measures applied to credit card companies and peer-to-peer payment platforms. Additionally, issuers would be allowed to invest in money market funds, repurchase agreements, and uninsured bank deposits, assets that have previously received government bailouts during financial crises.
Concerns Over U.S. Dollar’s Global Standing
Data shows the U.S. dollar’s share in global foreign exchange reserves has declined from over 70% in the early 2000s to below 60% today. Critics argue that expanding private stablecoin issuance without stricter oversight could weaken the dollar’s dominance in international markets.
Despite these concerns, Committee Chairman Tim Scott (R-S.C.) defended the bill, calling it a bipartisan leap forward to protect consumers, foster innovation, and maintain the U.S.’s position in the global financial system.
FIRM Act Also Clears Committee Vote
Alongside the GENIUS Act, the Financial Integrity and Regulation Management (FIRM) Act, sponsored by Chairman Scott, also passed the committee vote. This legislation seeks to eliminate regulatory use of reputational risk as a factor in determining financial institution stability, aiming to prevent financial regulators from “debanking” individuals or businesses based on political or industry-related concerns.
Scott emphasized that the bills mark a return to regular order in the committee’s legislative process, stating that for too long, the lack of regulatory clarity has left both consumers and businesses in uncertainty.
Political Implications and Next Steps
The committee’s 18-6 vote advances the GENIUS Act to the full Senate, fast-tracking a policy priority of former President Donald Trump. The bill’s passage represents a significant win for the cryptocurrency industry, which argues that stablecoins could provide faster and more affordable transactions worldwide. However, Senator Elizabeth Warren (D-Mass.) and other opponents warn that unchecked stablecoin expansion could undermine financial stability.
As the debate over digital asset regulation intensifies, the GENIUS Act now moves closer to a Senate floor vote, setting the stage for further deliberations on the future of stablecoins in the U.S. financial system.
