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Senate Banking Committee Markup on Stablecoin Legislation – March 13, 2025

April 16, 2025 Uncategorized

SENATE BANKING COMMITTEE MARKUP ON STABLECOIN LEGISLATION 

Below is a summary of the hearing prepared by Delta Strategy Group.  It includes several high-level takeaways, followed by summaries of discussion points.  For questions on the note below, please contact the Delta Strategy Group team. 

Overview

On March 13, the Senate Committee on Banking, Housing, and Urban Affairs held an Executive Session to consider the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, and the Financial Integrity and Regulation Management (FIRM) Act.   

Senators Bill Hagerty (R-TN), Tim Scott (R-SC), Kirsten Gillibrand (D-NY), Angela Alsobrooks (D-MD), and Cynthia Lummis (R-WY) introduced the GENIUS Act to “to provide for the regulation of payment stablecoins, and for other purposes.”  Senate Banking Chairman Tim Scott (R-SC) introduced the FIRM Act, co-sponsored by all Republican members of the Committee, including Senators Mike Crapo (R-ID), Mike Rounds (R-SD), Thom Tillis (R-NC), John Kennedy (R-LA), Bill Hagerty (R-TN), Cynthia Lummis (R-WY), Katie Britt (R-AL), Pete Ricketts (R-NE), Kevin Cramer (R-ND), Bernie Moreno (R-OH), Rich McCormick (R-GA), and Jim Banks (R-IN) “to curtail the political weaponization of federal banking agencies by eliminating reputational risk as a component of the supervision of depository institutions.”   

The Committee voted to report the GENIUS and FIRM Acts as amended to the Senate.  Eighteen Senators, including five Democrats, voted in favor of the GENIUS Act.  In a Republican party-line vote, thirteen Senators voted in favor of and eleven against reporting the FIRM Act as amended to the Senate.  Text of the final markup is available here.  Amendments specifics have not been released yet, and we will provide updates as more information becomes available.  

Key Takeaways

The following is a summary of the main topics explored in the hearing, with further details in the Discussion section below.   

  • Chairman Scott (R-SC) responded to questions on market structure legislation that his staff is working on it and is ready to engage in discussions.  The GENIUS Act will provide clarity for cryptocurrency ecosystem, support domestic innovation, and establish common-sense rules, such as requiring stablecoin issuers to maintain 1:1 reserves and ensuring compliance with AML laws.  
  • Senator Lummis (R-WY) said that stablecoins will be addressed before moving to market structure considerations and market risk concerns, emphasizing that the GENIUS Act is “not a framework to regulate the secondary market.” 
  • Senator Hagerty (R-TN) discussed how the GENIUS Act proposes a system where stablecoin issuers can register with either state or federal authorities, depending on their market capitalization.  He highlighted how the Act explicitly designates stablecoin issuers as financial institutions for anti-money laundering (AML) purposes, requiring them to establish compliance programs and conduct due diligence on high-value transactions. 
  • Senator Mike Rounds (R-SD) discussed how the Taking Account of Institutions with Low Operation Risk (TAILOR) Act mandates that federal financial regulators consider individual financial institutions’ risk profiles when formulating regulations.  He noted it requires regulators to submit an annual report to Congress detailing regulatory adjustments and banks supervision modernization efforts. 
  • Senator Cortez-Masto (D-NV) raised concerns about giving payment stablecoin issuers the ability to engage in any non-payment stablecoin activity and how it negates proposed guardrails.  She emphasized that the GENIUS Act must expressly limit the activities of a stablecoin issuer to only the activities that directly support the duties and activities pertinent to issuing and redeeming stablecoins.   

Discussion

Chairman Tim Scott (R-SC) 

  • The GENIUS Act is a bipartisan step toward ensuring stablecoins are safe and reliable tools in the financial system.  It will provide clarity and establish common-sense rules requiring stablecoin issuers to maintain 1:1 reserves and comply with AML laws. Economic supremacy requires the U.S.to encourage innovation rather than stifling it with excessive regulation. 
  • The GENIUS Act has capital liquidity and risk management requirements, which we cannot weaken by eliminating the reserve asset diversification requirement.  Primary federal payment stablecoin regulators are given discretion when applying these standards, which grants regulators tailoring flexibility, will help ensure that regulations are workable. 
  • The FIRM Act will eliminate regulators’ ability to use reputational risk as a justification to debank legally operating businesses and individuals.  No federal agency should have the power to cut off financial services simply because they disapprove of a customer’s politics, business, or industry.  This bill ensures that banks make decisions based on financial risk, not political preference.  While the FIRM Act is a critical first step, other bills like Senator Cramer’s Fair Access to Banking Act (FABA), also address debanking with a commitment to finding long-term solutions. 
  • The FIRM Act is narrowly crafted in dealing with bank supervision and abuse by bank regulators. It has nothing to do with any form of bank activities or revenue streams; it would be inappropriate to include a report on any form of bank activity. 
  • It does not make sense to limit payment stablecoin issuance to only banks; issuing payment stablecoins is inherently different from banking.  Payment stablecoin issuers do not offer lending or credit products and payment stablecoins are backed one-to-one in reserves.  The traditional concerns underlying the separation of banking and commerce do not apply in this framework.  The alternative is allowing banks to dominate the stablecoin space, stifling innovation and eliminating competition in this emerging market. 

Ranking Member Elizabeth Warren 

  • The GENIUS Act current form does not protect consumers, national security, and financial stability.  It ignores basic consumer protections that apply to every other financial product available in America, with the support of the Consumer Financial Protection Bureau (CFPB).  It invites scammers into the market by refusing to prohibit people convicted of fraud and money laundering from owning stablecoin companies, with no legal grounds to stop it under this bill.  
  • The Act lacks basic counter-terrorism protections that apply to every other type of financial transaction in America.  It does not authorize the U.S. to enforce existing sanctions, such as when actors buy illicit materials using dollar-backed stablecoins instead of dollars.   
  • The GENIUS Act lacks basic safeguards necessary to ensure that stablecoins do not blow up the entire financial system and must impose market discipline.  We need to enable the Treasury to sanction the crypto mixing services and strengthen law enforcement measures against illicit actors. 
  • The Act distributes massive economic power that is usually reserved for publicly chartered banks, with the potential to undercut the U.S. dollar and destabilize our financial system. We need to protect the financial system, promote competition, and prevent the concentration of excessive economic power in the hands of a few giants.  
  • None of these fixes to current gaps in the GENIUS Act would restrict stablecoins or restrain innovation.  We need straightforward amendments that apply the same basic rules in the stablecoin market as we have for every other financial product.  If we can find compromises on these issues today, I am prepared to support this Act.  If not, I will work to defeat it.   
  • I have deep concerns about the FIRM Act but support bipartisan steps to address debanking.  The current Act would hamstring regulators in their efforts to preserve the safety and soundness of the banking system without addressing the underlying causes of debanking. 

Senator Bill Hagerty (R-TN) 

  • A clear regulatory framework for stablecoins can play a pivotal role in modernizing payment systems through improving transaction efficiency, freeing up working capital, and driving U.S. Treasury demand.  
  • The GENIUS Act establishes common-sense rules that protect consumers, promote competition, and foster innovation without excessive regulatory overreach.  It addresses the concerns raised and clarifies that many of these claims do not apply.  Senator Alsobrooks has proposed an adjustment to ensure the proper technical application of consumer protection laws.  There are no loopholes in this bill, and if any technical fixes are necessary, they will be addressed. 
  • The GENIUS Act addresses risky assets by ensuring that stablecoins are always backed 1:1 with highly liquid reserves that are published and that are examined on a monthly basis.  Many of these issues raised are more related to market structure discussions and potential legislative approaches.  We need to establish comprehensive AML BFA illicit finance framework beyond solely issuers in the crypto ecosystem in future legislation, including a market structure bill. 
  • The GENIUS Act needs to go into effect to disrupt the financing of bad actors, as it enhances national security by regulating and registering payment stablecoins issuers while ensuring that they comply with law enforcement.  Under the Act, stablecoin issuers must already comply with BSA, including filing suspicious activity reports (SARs) and cooperating with law enforcement. 
  • The Act’s provisions were updated to put more fundamental AML requirements in classifying payment stablecoin issuers as financial institutions under the Bank Secrecy Act (BSA), subjecting them to AML program requirements, such as suspicious activity reporting.  It mandates that stablecoin issuers maintain the technical ability to freeze and burn wallets that will allow them to ensure compliance with lawful orders and directs the Financial Crimes Enforcement network to adopt rules implementing the BSA and AML requirements for payment stablecoins issuers.  It strengthens Treasury’s ability to coordinate sanctions enforcement and increases law enforcement capacity.  
  • We cannot allow stablecoins to be tied to other countries’ currencies.  The purpose of the GENIUS Act is to ensure that U.S. stablecoins are backed solely by U.S. Treasuries and dollars.  We must maintain the exclusive U.S. dollar backing for stablecoins to preserve our dollar reserve currency.  The Act will allow the dollar to grow internationally, generating long term demand for U.S. Treasuries. 

Senator Cynthia Lummis (R-WY) 

  • The GENIUS Act promotes responsible financial innovation and protects consumers with necessary safeguards and clarity.  It strengthens the dual-banking system by creating a strong pathway for both state and federal stablecoin issuers to operate on a level playing field under robust supervision.  We are addressing stablecoins narrowly before moving to market structure considerations, raised in these Amendments.   
  • The Act builds on Wyoming’s successful framework with a very fair but highly transparent and regulated process.  Current provisions strike the right balance between consumer protection and transparency.  We cannot unnecessarily restrict the reserve options for stablecoin issuers as it would make stablecoin issuance not economically viable and impose duplicative audit requirements that discourage entry into the market.  The Act carefully limits the activities of permitted payment stablecoin issuers to ensure consumer protection and prevent regulatory overreach.  It is already restrictive to certain business models, such as Tether. 

Senator Angela Alsobrooks (D-MD) 

  • We need to address emerging markets in a way that protects consumers, drives innovation, expands market benefits and access, and prioritizes U.S. leadership.  The GENIUS Act provides a foundational framework to build on, with an opportunity to make positive changes toward our common goal.  We need to address concerns that revisions to the state preemption language may have unintended consequences. 

Senator Jack Reed (D-RI) 

  • The GENIUS Act must narrow the list of permitted investments for stablecoin issuers to ultra-safe assets, specifically cash, insured bank deposits, and short-term Treasury bills.  The implicit guarantee of a dollar’s worth in stablecoin will not hold unless the underlying assets are liquid and secure.  We must affirm that the U.S. dollar is the official currency of the U.S. and that it cannot be replaced or supplanted by an alternative as legal tender. 
  • The current Act allows stablecoin issuers to invest customer funds in potentially risky instruments, including repos with unregulated hedge funds, uninsured deposits, or any other liquid asset approved by a federal or state regulator.  We have already seen the dangers of such risks with previous bailouts and must avoid repeating this mistake in the crypto industry. 
  • The $50 billion threshold would require only a single stablecoin issuer, Circle, to an annual audit.  I propose lowering the threshold to align with the bill’s other provisions, which require issuers with $10 billion or more in stablecoins to be subject to federal oversight and undergo an independent audit.  If an issuer is large enough to warrant federal oversight under this bill, it is also large enough to be required to obtain an order. 
  • We need to enable the Treasury Department to sanction the crypto mixing services that are used by rogue states and criminal enterprises, with stronger safeguards and AML provisions. 
  • We must prohibit debanking without “valid reason to do so,” and place guardrails around the regulator’s use of reputational risk without eliminating the concept entirely, such as through amending Section 10 of the Safer Banking Act.  

Senator Chris Van Hollen (D-MD) 

  • I have concerns on international bad actors’ ability to evade sanctions, demonstrating the need for strong AML provisions. 
  • The GENIUS Act needs the additional requirement that Congressional members disclose financial interest in payment stablecoin issuers for straightforward public disclosure and transparency.  

Senator Catherine Cortez Masto (D-NV) 

  • The American Bankers Association (ABA) raised concerns about the removal of subsection B of Paragraph 4A, which gives payment stablecoin issuers the ability to engage in any non-payment stablecoin activity.  We need to expressly limit the activities of a stablecoin issuer to only the activities that directly support the duties and activities pertinent to issuing and redeeming stablecoins.  The inclusion of Subsection B negates the guardrails supported in Amendment 11.  
  • The GENIUS Act is a good start but is not ready.  We need to remain open to inclusion of provisions offered by industry participants, with reasonable compromises to create an improved product.  
  • We need to implement protective measures in the Act to decrease recognized adversarial risks address and geopolitical factors to on the discussions U.S. stablecoin reserves and issuers.   
  • We must ensure that people in the U.S. can only access payment stablecoins if the stablecoin is redeemable solely in dollars or money issued by the central bank of a G7 member.  This will prohibit stablecoins from being redeemed by the central bank of any adversarial country.  

Senator Bernie Moreno (R-OH) 

  • We face the choice between global market dominance of a Chinese stablecoin versus a U.S. denominated stablecoin.  A U.S. stablecoin would fortify the U.S. dollar and become the gold standard.  

Senator Tina Smith (D-MN) 

  • The current GENIUS Act does not go far enough to address volatility and consumer protection, with the needs for protections in place without delays and fees to increase consumer confidence in the system and stablecoins.   

Senator Rapheal Warnock (D-GA) 

  • We need to make it clear to stablecoins issuers, digital asset exchanges, and consumers that CFPB protections apply and that stablecoins are not an exception to the rule. My amendment affirms that nothing in the bill changes, limits, or removes protections consumers currently receive legally from the CFPB. 
  • There have been considerable improvements made to the Act, but more work remains to protect consumers and to protect the financial system.  The Act needs stronger consumer protections and must tighten up restrictions related to national security and unregistered foreign stablecoin issuers.  I am going to vote no today, but I hope to vote yes on the floor.  

Senator Andy Kim (D-NJ) 

  • There needs to be deterrence under law to ensure that stablecoin issuers do not engage in any activities that would facilitate funds to any such cartels or foreign terrorist organizations. I support the additions since the Act’s initial introduction with respect to the illicit finance provisions, but more needs to be done to help counter bad actors.    

Senator Lisa Blunt Rochester (D-DE) 

  • We still have a ways to go in strengthening the GENIUS Act.  

Senator Mark Warner (D-VA) 

  • The current Act significantly strengthened BSA and AML regulations, made it easier to seize and freeze assets, and established criminal penalties, with substantial action taken on foreign issuers.  This is strong legislation that needs a bipartisan Committee vote, and I will be supporting it.  

Senator Mike Rounds (R-SD) 

  • The TAILOR Act mandates that federal financial regulators consider individual financial institutions’ risk profiles when formulating regulations.  It also requires regulators to submit an annual report to Congress detailing regulatory adjustments and banks supervision modernization efforts.  

Amended and Reported Acts 

GENIUS Act 

  • Eighteen Senators voted in favor, with six opposed, to report the GENIUS Act as amended to the Senate.  Five Democrats voted in favor of the Act.  

FIRM Act 

  • Thirteen Senators voted in favor of and eleven against, in a party line vote, reporting the FIRM Act as amended to the Senate.