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THE LATEST STABLECOIN GENIUS ACT DRAFT: ADDRESSING KEY DEMOCRAT OBJECTIONS?
Yesterday, Punchbowl News reported that Senate leader John Thune had filed for a procedural vote (cloture) on the Stablecoin GENIUS Act — the same vote that failed last week. Hence, another vote is likely to be held next week. Democrat Senator Kirsten Gillibrand claimed major progress on the bill, indicating that several Democrats were gearing up to support it.
However, last night, Punchbowl published a memo from Senator Elizabeth Warren highlighting ongoing problem areas.
Ongoing Concerns About Trump Family Interests
Firstly, she objected that there’s nothing in the Bill stopping elected officials and their families from issuing stablecoins. The involvement of President Trump’s sons with crypto firm World Liberty Financial is viewed as controversial by some. That concern was exacerbated when its new stablecoin, USD1, was used in a $2 billion transaction by a firm chaired by the UAE’s national security adviser.
Regarding families, earlier this week, Senator Gillibrand implied that family members are legally permitted to issue stablecoins. However, officials themselves cannot. Since early May, there has been a GENIUS Act clause that states:
“For the avoidance of doubt, existing Office of Government Ethics laws and the ethics rules of the Senate and the House of Representatives prohibit any member of Congress or senior executive branch official from issuing a payment stablecoin during their time in public service.”
BigTech Stablecoin Issuance
Senator Warren’s second objection is that BigTech firms, such as Meta or X, are still allowed to issue stablecoins.
While the latest draft does not have a blanket ban, it includes a significant clause addressing issuance by public non-financial corporations. These firms must be approved by the Stablecoin Certification Review Committee, which will assess:
- Financial stability concerns
- Protection of consumer data
- Avoiding tying stablecoin services to other business activities
However, this only applies to public companies. For example, it would not apply to X, Stripe, or other unlisted unicorns. The Committee will consist of the:
- Secretary of the Treasury
- Federal Reserve Chair or Vice Chair
- Chair of the FDIC
Terrorism and Criminal Activities
Senator Warren is also concerned about the use of stablecoins for terrorist and criminal activities. She wrote:
“New language in the draft bill imposing restrictions on when foreign companies can issue stablecoins in the United States makes no material difference, given that the coins could still be issued offshore and moved through domestic decentralized exchanges accessed by terrorists and criminals.”
Her concern might relate to a change in wording — replacing “any person” with “digital asset service provider” (DASP) in several places. This was likely done to align with the upcoming crypto market infrastructure legislation. However, individuals involved in decentralized exchanges may not be covered under the DASP definition — potentially creating a loophole.
Stablecoins and Financial Stability
Stablecoins offer many potential benefits, but they also carry significant financial stability risks. Senator Warren believes these risks are not sufficiently addressed in the current draft:
“[The bill] would still allow issuers to actually invest their reserves in riskier assets, hold them in offshore accounts, engage in dangerous financial and commercial activities, and prevent regulators from applying strong safeguards — inviting a future crash and costly bailouts.”
Other jurisdictions generally require onshore reserve holdings for stablecoins, whereas the GENIUS Act is different in this respect. Some argue that reserves should only be invested in direct government securities, not in money market funds that add a layer of risk.
There is also growing interest in using tokenized assets for stablecoin reserves. These are often tokenized money market funds, which raises the need for clear tokenization standards, including:
- Secure custody providers
- Transparent audits
- Prohibitions on rehypothecation (lending of underlying assets)
There’s no point in banning stablecoin issuers from lending reserves if the tokenization firm can do so instead.
Political Landscape and Path Forward
Despite these concerns, it’s important to consider the broader political context. Senator Warren has long held strong opposition to cryptocurrencies and stablecoins. Her support for any such legislation remains unlikely.
The key to successful regulation lies in garnering Democratic support from lawmakers like Gillibrand, who understand that regulating existing stablecoins is critical. Without a clear framework, the regulatory vacuum may only increase the risks posed by this growing financial sector.
@ Newshounds News™
🔗Source: Ledger Insights
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🚫 JUDGE DENIES JOINT BID FROM RIPPLE AND THE SEC TO END XRP LEGAL BATTLE
A U.S. judge has rejected a joint request from Ripple and the SEC that sought to end their long-running legal dispute over XRP, saying their bid failed to meet legal requirements.
⚖️ What happened?
Ripple and the SEC filed a joint motion for an “indicative ruling” to reduce Ripple’s $125 million civil penalty to $50 million, and potentially vacate the penalty altogether.
But District Judge Analisa Torres shut it down, saying the parties failed to address the legal burden required to change or vacate the prior judgment.
🧾 Judge Torres wrote:
“Relief from judgment under Rule 60 is granted ‘only upon a showing of exceptional circumstances’… The parties have made no effort to satisfy that burden here; their request does not even mention the rule.“
She concluded:
“If jurisdiction were restored, the court would deny the parties’ motion as procedurally improper.”
📜 Background on the case:
- The SEC sued Ripple in late 2020, alleging it sold XRP as an unregistered security.
- In 2023, Judge Torres ruled that Ripple’s open-market XRP sales were NOT securities, but said institutional sales WERE.
🧨 In August 2023, Ripple was hit with a $125 million penalty. Both Ripple and the SEC have appealed the amount.
📉 Post-Gensler Fallout:
Since Donald Trump took office and Gary Gensler exited the SEC, the agency has walked back several crypto enforcement actions. But this case continues to hang in the balance.
📌 Judge Torres’ ruling keeps the legal penalties in place — and the battle continues.
@ Newshounds News™
📎 Source: DailyHodl
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