Charting the Future Steps of the Senate Stablecoin Legislation

House Republicans have introduced a draft for a legislation concerning market structures; however, the Senate’s focus this week was on a bipartisan initiative surrounding stablecoin regulations that faced significant obstacles.

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Current Events

Stablecoin and market structure proposals are critical areas of concern within the cryptocurrency sector, anticipated to reach the President’s desk this year. A press conference involved notable figures from both House and Senate committees, with a collective goal to finalize matters before the upcoming August break.

Significance

Among these proposals, the stablecoin legislation was expected to be more straightforward, focusing specifically on one sector of the broader cryptocurrency landscape. In contrast, the market structure proposal aims to define rules governing a wider array of industry processes and regulatory oversight. The stablecoin legislation appeared to be progressing well until recently, but its path to becoming law has become less predictable.

Analysis

It is noteworthy that sources I’ve consulted this week have not deemed the Senate’s stablecoin legislation—the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act—as defunct. After last Thursday’s vote, which did not pass, discussions resumed, and a new vote might occur next week, potentially as soon as Monday.

The initial vote failed following concerns raised by Democrats about implications for national security and the stability of the financial framework, although Republicans emphasized the urgency of advancing stablecoin regulation. Additionally, controversies surrounding the President’s financial gains from stablecoins have prompted proposals to restrict him from participating in cryptocurrency activities, including the “End Crypto Corruption Act,” aimed at preventing Congress members and certain government officials from engaging with crypto assets.

On Wednesday, reports suggested a potential deal might surface allowing Democrats to present the End Crypto Corruption Act for a vote, either as an amendment or independently, ahead of the GENIUS Act’s procedural vote.

This proposal ultimately was not brought forth for a vote, and the cloture vote proceeded as planned, resulting in a close outcome of 48-49.

The vote did not strictly align along party lines; while all Democrats opposed it, Republican Senators Josh Hawley and Rand Paul also voted against the motion, with Senate Majority Leader John Thune initially supporting the bill but later altering his vote to facilitate another opportunity for consideration.

Another complication arose due to the absence of the complete text of the bill during the voting process.

The cloture vote serves as leverage for Democrats to incorporate priorities into the bill, requiring a minimum of 60 votes for passage. After the debate phase, another cloture vote will occur before the final vote. It is pointed out that lawmakers who support the debate are unlikely to reverse their positions later, as noted by sources.

Many individuals I spoke to do not foresee any amendments preventing the President from engaging with or connecting to announcements about stablecoin issuers being included in the final draft.

Current negotiations seem to emphasize the treatment of foreign issuers and anti-money laundering regulations.

Heightened concern exists that a lengthy delay in finalizing the stablecoin legislation may impede advancements on the market structure proposal, which seeks to redefine how the Commodity Futures Trading Commission and the Securities and Exchange Commission regulate digital assets, including classifications of cryptocurrencies as securities. A discussion draft of this proposal was released in the House this week.

If the Senate acts swiftly on the stablecoin legislation within the next week, there shouldn’t be a bottleneck affecting the market structure proposal, according to various sources.

• U.S. Crypto Market Structure Bill Introduced by House Representatives: This headline summarizes an upcoming discussion. Further updates will follow in subsequent weeks.
• New Hampshire Becomes First State to Endorse Crypto Reserve Law: This clearly outlines a notable legal development.
• Samourai Wallet Prosecutors Assert Delayed FinCEN Disclosure Was Not a Brady Violation: Defense attorneys recently claimed that crucial evidence regarding a discussion with Financial Crime Enforcement Network officials was withheld, while prosecutors countered that no evidence was intentionally withheld.
• SEC and Ripple Sign $50M Settlement Agreement, Seek Court Approval: Ripple and the SEC are awaiting judicial approval for their settlement agreement first announced back in March.
• Betting Markets Lose Millions Predicting the New Pope as Polymarket Activity Dwindles: With the election of the new Pope, Polymarket bettors assigned a minimal probability of success to the successor of Pope Francis.
• Binance Founder CZ Seeks Trump Pardon After Guilty Plea: Changpeng Zhao revealed he requested a pardon from President Trump following his guilty plea related to Bank Secrecy Act violations.
• CFTC Withdraws Appeal in Kalshi Election Betting Case: The CFTC has effectively cleared the path for political event contracts to officially be introduced in the U.S. after backing down from an appeal regarding Kalshi’s favorable court ruling.
• Senate Democrat Investigates Trump’s Cryptocurrency Ventures: Senator Richard Blumenthal has reached out to executives at two organizations linked to Trump to inquire about their cryptocurrency initiatives.
• Coinbase’s SEC Filings Reveal NY Attorney General Requested ETH Classification as Security: According to documents obtained via a Freedom of Information Act request, New York Attorney General Letitia James sought SEC intervention to classify ETH as a security during the case against KuCoin.
• OCC Confirms Banks Can Trade Customer Crypto Assets Held in Custody: The Office of the Comptroller of the Currency affirmed that banks may engage in trading crypto assets for customers held in custody while utilizing third-party service providers.
• As Meta Considers Tokens, Senator Warren Advocates Against Big Tech Stablecoins: Meta (formerly Facebook), which previously sought to enter the cryptocurrency space in 2019, is reportedly considering stablecoin options again, raising concerns from Senators Elizabeth Warren and Josh Hawley.

Tuesday

• 10:00 a.m. ET (14:00 UTC) The House Financial Services and Agriculture Committees were scheduled to convene a joint hearing on digital asset market structure; however, FSC Ranking Member Maxine Waters opposed this and opted to hold her own session focused on Trump’s cryptocurrency activities.

Thursday

• (404 Media) Reports reveal that former National Security Advisor Michael Waltz was using TeleMessage, an unofficial messaging platform, instead of Signal, and that it was subsequently hacked before being temporarily suspended.
• (The San Francisco Standard) Jeffy Yu purportedly faked his own death to inflate the value of a memecoin; he has now resurfaced at his parents’ home according to reports.

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Looking forward to connecting next week!