Senate Advances GENIUS Act with Bipartisan Support: What It Means for Stablecoin Regulation

On May 20, 2025, the U.S. Senate voted 66-32 to invoke cloture on the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, a significant step toward establishing a federal regulatory framework for the around $250 billion stablecoin market, currently dominated by Tether’s USDT and Circle’s USDC. The motion to invoke cloture, which ends debate and allows the bill to proceed to formal deliberation, marks a critical milestone for the legislation introduced by Senator Bill Hagerty (R-TN) on February 4, 2025. However, the bill itself has not yet been passed and will now face debate and potential amendments in the Senate before moving to the House of Representatives.

Bipartisan Support and Key Vote Shifts

The successful cloture vote reflects a shift in sentiment. As reported by Eleanor Terrett, 16 Democratic senators, including Catherine Cortez Masto (D-NV), Adam Schiff (D-CA), Mark Warner (D-VA), and Ruben Gallego (D-AZ), shifted from opposition to support for the cloture motion, reflecting growing bipartisan alignment. Senate Minority Leader Chuck Schumer (D-NY) voted against the motion, aligning with critics like Senator Elizabeth Warren (D-MA), who has raised concerns about consumer protections and potential conflicts of interest involving President Trump’s USD1 stablecoin.

Notably, candidates supported by the pro-crypto super PAC Fairshake—Schiff, Gallego, Elissa Slotkin (D-MI), and Bernie Moreno (R-OH)—all voted in favor, highlighting the influence of crypto advocacy in the vote.

Core Provisions of the GENIUS Act

The GENIUS Act aims to bring regulatory clarity to stablecoins, defined as digital assets pegged to the U.S. dollar for use in payments or settlements. According to the GENIUS Act text published by Congress and Eleanor Terrett’s reporting on the revised draft, key provisions of the latest draft include:

• Dual Regulatory Structure: Stablecoin issuers managing over $10 billion in assets will be overseen by the Federal Reserve, while those with less than $10 billion can operate under state regulation, provided state rules align with federal standards. This aims to prevent regulatory fragmentation across states.

• Reserve Requirements: As detailed in the congressional text, issuers must maintain a 1:1 reserve ratio backed by high-quality assets, including U.S. coins and currency, Federal Reserve notes, demand deposits at insured institutions, Treasury securities with maturities of 93 days or less, repurchase agreements backed by short-term Treasuries, money market funds investing in these assets, or central bank reserves. This ties stablecoin issuance to U.S. Treasuries, potentially boosting Treasury demand.

• Prohibition on Misleading Claims: As Eleanor Terrett’s reported, the revised GENIUS Act explicitly bans issuers from claiming their stablecoins are insured by the Federal Deposit Insurance Corporation (FDIC) or backed by U.S. government credit, safeguarding federal financial credibility during potential crises.

• Restrictions on Tech Giants: According to Terrett, the updated draft limits non-financial tech companies like Tesla, Meta, Amazon, Google, and Microsoft from issuing stablecoins unless they meet stringent requirements, aiming to prevent market dominance by tech firms and keep stablecoin issuance within traditional financial systems.

• Other Safeguards: The bill, as disclosed by Congress, includes provisions for customer asset protection, bankruptcy procedures, and ethical standards. It also clarifies that stablecoins are neither securities nor commodities, providing legal clarity.

Industry and Market Implications

The GENIUS Act targets a stablecoin market dominated by USDT and USDC, with implications for issuers like Tether, which may face challenges meeting transparent reserve requirements. The bill’s reserve and anti-money laundering (AML) rules favor compliant stablecoins like USDC and Ripple’s RLUSD, potentially reshaping market dynamics. According to a report by Bernstein, stablecoin issuers already rank as the 18th largest holder of U.S. Treasuries, and the bill’s reserve rules could further drive Treasury demand, reinforcing the dollar’s global role.

Josh Vlasto, spokesperson for the CEDAR Innovation Foundation, celebrated the vote, stating, “We congratulate the Senate on today’s vote. This action, and eventually passage of a stablecoin bill, clears the path for Congress to act on the mandate of voters to pass market structure legislation which creates clear rules of the road for digital assets.”

The Senate’s cloture vote has sparked a robust market response, with investors interpreting the progress as a signal of impending regulatory clarity for stablecoins. As of the press time, according to CoinGecko, AAVE, a leading decentralized finance (DeFi) protocol closely tied to stablecoin lending and liquidity provision, surged 21.4% in the past 24 hours, reflecting optimism about its role in a regulated stablecoin ecosystem. Similarly, Curve DAO (CRV), a decentralized exchange focused on stablecoin trading, saw a 7.6% price increase over the same period, driven by its prominence in stablecoin liquidity pools.

Political Challenges and Trump Controversy

The GENIUS Act faced hurdles in its earlier May 8, 2025, cloture vote, failing with 49 votes due to Democratic concerns over consumer protections and potential benefits to President Trump’s USD1 stablecoin, launched in April 2025 and now valued at over $2 billion. Senator Warren warned on May 19 that the bill could “turbocharge Trump’s corruption.”

The newly revised draft, as reported earlier, removed restrictions targeting Trump’s crypto business and added limits on tech giants, securing broader bipartisan support.

Senator Warner, in a May 19 statement, called the GENIUS Act a “meaningful step forward,” despite ongoing concerns about Trump’s crypto ties. “We cannot allow that corruption to blind us to the broader reality: blockchain technology is here to stay,” Warner said. “We have a responsibility to ensure it happens safely, transparently, and in a way that advances U.S. economic and national security interests.”

Next Steps and Outlook

With the cloture vote passed, the GENIUS Act enters Senate debate, where amendments could refine its provisions. Republicans aim to pass the bill before Memorial Day on May 26, 2025. While it remains uncertain whether this goal will be achieved, given that the House of Representatives typically faces fewer hurdles in passing legislation, the Senate’s successful cloture vote represents a landmark step toward establishing legal regulation for stablecoins in the United States.