Senate Rejects GENIUS Act, Delays Stablecoin Rules Amid Trump Ties

On May 8, 2025, the U.S. Senate voted 48-49 to reject a procedural motion to advance the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, a landmark bill aimed at creating the first federal regulatory framework for stablecoins—digital tokens pegged to assets like the U.S. dollar. The cloture vote, which required 60 votes to proceed to a full Senate debate, fell short, highlighting deep partisan divides and concerns over unresolved issues, including insufficient anti-money laundering (AML) measures and national security safeguards. Democratic senators also expressed alarm over President Donald Trump’s cryptocurrency business, particularly his family’s World Liberty Financial (WLFI) project and stablecoin USD1, which critics argue could benefit from the legislation, raising conflict-of-interest concerns

Senate’s Rejection and Unresolved Issues

The GENIUS Act, introduced by Senator Bill Hagerty (R-Tenn.) and co-sponsored by Senators Tim Scott (R-S.C.), Cynthia Lummis (R-Wyo.), Kirsten Gillibrand (D-N.Y.), and Angela Alsobrooks (D-Md.), passed the Senate Banking Committee in March 2025 with a bipartisan 18-6 vote, including support from five Democrats. Senate Majority Leader John Thune (R-S.D.) filed cloture on May 6 to expedite a procedural vote, but the motion failed as Republican Senators Josh Hawley (R-Mo.) and Rand Paul (R-Ky.) joined all present Democrats in opposing it. Senate Majority Leader John Thune (R-S.D.) also voted against the motion, a strategic move to facilitate reintroducing the bill for consideration at a later date.

In a statement last Saturday, nine key Senate Democrats said they wouldn’t support GOP-led stablecoin legislation if it goes to the floor in its current form. Democrats cited deficiencies in AML and counter-terrorism financing (CTF) provisions, inadequate oversight of foreign stablecoin issuers, and weak protections for financial system stability. They also demanded clearer accountability for non-compliant issuers and measures to address national security risks, such as illicit transactions linked to stablecoins. Republicans Rand Paul (R-Ky.) and Josh Hawley (R-Mo.) also opposed the motion, worrying about overregulation and Big Tech’s potential dominance in stablecoin issuance. The opposition deals a slight blow to stablecoin legislation process and broader cryptocurrency regulation, while supporters are still confident about the GENIUS Act. In his X post, Coinbase CEO Brian Armstrong called the vote a “first round of negotiations,” criticizing a clause banning interest-bearing stablecoins and predicting a new vote soon.

Trump’s Crypto Ties and Corruption Concerns

The rejection was heavily influenced by Democratic concerns over President Trump’s cryptocurrency ventures, which critics argue could exploit the GENIUS Act for personal gain. Key events amplifying these worries include:

• $TRUMP Memecoin and White House Dinner: In April 2025, the Trump family announced that the top 220 holders of the $TRUMP memecoin—a collectible token launched in January 2025—would be invited to an exclusive dinner with the president at his Virginia golf club, followed by a White House tour. The announcement caused a 94.6% price surge in 9 days, boosting the token’s market cap to $3.2 billion and generating over $320 million in fees for the Trump Organization, which controls 80% of the supply. Senators Elizabeth Warren (D-Mass.) and Adam Schiff (D-Calif.) called for an ethics probe, alleging the event was a “pay to play” scheme. Senator Chris Murphy (D-Conn.) introduced a bill on May 6 to prohibit U.S. President Donald Trump and other federal officials from promoting the commander-in-chief’s meme coin.

• World Liberty Financial (WLFI) and USD1 Stablecoin: WLFI, a Trump family-backed DeFi project, launched the USD1 stablecoin in March 2025, backed by U.S. Treasuries and cash equivalents. On May 1, Eric Trump, son of U.S. President Trump, announced that Abu Dhabi’s MGX would use USD1 for a $2 billion investment in Binance, a deal critics labeled as evidence of Trump’s influence peddling. The stablecoin’s circulation reached $2.1 billion, with one anonymous wallet holding $2 billion, raising transparency concerns. Senator Warren called the deal “corruption,” arguing the GENIUS Act lacks safeguards to prevent Trump’s profiteering.

• WLFI’s Ties to Justin Sun and Tron: WLFI integrated USD1 with the Tron blockchain, founded by Justin Sun, who invested $75 million in WLFI’s WLFI token. Sun was also the hugest holder of $TRUMP memecoin, according to the official leaderboard. Sun faced a U.S. SEC fraud lawsuit, which was paused in February 2025 under Trump’s administration, fueling allegations of favoritism.

Implications and Industry Perspectives

The GENIUS Act seeks to regulate payment stablecoins by limiting issuance to licensed entities, requiring 1:1 reserve backing with liquid assets, and enforcing AML/CTF compliance. It bans algorithmic stablecoins and exempts stablecoins from SEC oversight, aiming to streamline state regulations and bolster U.S. dollar dominance. With the stablecoin market exceeding $241.9 billion, led by Tether (USDT) and Circle (USDC) as of May 9, 2025, the bill’s delay leaves issuers in regulatory limbo, potentially pushing innovation abroad.

As a co-sponsor of the bill, Senator Cynthia Lummis expressed her disappointment with the rejection. In a statement, she said, “I’m deeply disappointed that we were unable to pass this important, bipartisan-crafted stablecoin legislation today. Make no mistake, digital assets are the future and America must lead the way.” Senate Majority Leader John Thune similarly voiced his frustration, stating, “Democrats have been accommodated every step of the way […] frankly, I just don’t get it.”

Despite the disappointment over the rejection, crypto industry stakeholders remain confident in the eventual passage of stablecoin regulation. In his post, Coinbase CEO Brian Armstrong highlighted “great progress” in cryptocurrency legislation this week. He emphasized bipartisan consensus on crypto regulation, noting, “One thing is clear - both sides care deeply about getting clear rules for crypto and getting it right. Both sides are leading and engaging. After years of being sidelined, crypto isn't just at the table, it's at the top of the agenda.”