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U.S. Senate Blocks Stablecoin Bill, Delivering Setback to Crypto Industry

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A bill aimed at establishing a U.S. regulatory framework for stablecoins failed to advance in the Senate on Thursday, marking a significant setback for the crypto industry and stalling hopes for near-term federal legislation governing dollar-pegged digital tokens.

Known as the GENIUS Act, the legislation fell short of the 60 votes needed to proceed to a full Senate vote, securing only 49 votes in favor. The failure comes despite months of lobbying by the crypto sector, which poured over $119 million into supporting pro-crypto candidates during last year’s election cycle and framed stablecoin regulation as a bipartisan issue.

Stablecoins — cryptocurrencies designed to maintain a stable 1:1 peg to the U.S. dollar — are widely used in crypto trading and payments, and their mainstream use has grown rapidly. While the industry had hoped the bill would pass this year, Democratic pushback intensified, particularly in light of former President Trump’s growing involvement in crypto ventures.

Two Republican senators — Josh Hawley and Rand Paul — voted against the bill alongside most Democrats, citing unresolved concerns. Senator Mark Warner, a Democrat who had previously backed the bill in committee, explained his opposition during the vote:

“The work is not yet complete, and I simply cannot in good conscience ask my colleagues to vote for this legislation when the text isn’t finished.”

A group of Democrats who initially supported the measure accused Republicans of refusing to strengthen the bill’s anti-money laundering safeguards and foreign stablecoin oversight, particularly following news that Trump-affiliated World Liberty Financial would launch a stablecoin to support a $2 billion Abu Dhabi-backed investment in Binance.

Senate Majority Leader John Thune expressed frustration on the floor after the vote, blaming Democrats for halting momentum:

“Not every bill that comes to the floor is a final bill… This was a missed opportunity for a bipartisan win.”

With this latest setback, the path forward for stablecoin regulation remains uncertain, and the crypto industry is left grappling with yet another delay in achieving formal legal clarity in the U.S. financial system.

Australia Imposes $5.1 Million Fine on Kraken’s Local Operator

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Australia’s Federal Court has ordered Bit Trade, the local operator of the Kraken cryptocurrency exchange, to pay a fine of AUD 8 million (approximately USD 5.1 million) for unlawfully offering a credit facility to over 1,100 customers. The ruling follows legal action initiated by the Australian Securities and Investments Commission (ASIC) in 2022, which accused Bit Trade of non-compliance with regulatory requirements tied to its margin trading product.

ASIC’s investigation found that Bit Trade failed to ensure its margin extension product was suitable for its customers, resulting in collective losses of more than USD 5 million. “Bit Trade issued its margin extension product to over 1,100 Australians, charging fees and interest exceeding USD 7 million, without considering whether the product was appropriate for them,” ASIC stated.

The margin extension product offered by Kraken’s operator allowed users to access credit or loans in either digital assets, such as Bitcoin, or traditional currencies like the U.S. dollar. However, this financial product was classified as a “credit facility” by the court in August, as it provided margin extensions in national currencies. Under Australian law, such products must include a publicly available target market determination (TMD), a document specifying the class of consumers best suited for the product.

This case marks the first enforcement action related to the absence of a TMD in Australia. ASIC emphasized the importance of compliance in ensuring consumer protection within the rapidly evolving cryptocurrency sector.

Bit Trade expressed disappointment with the decision. A Kraken spokesperson stated, “We believe these rulings significantly hamper growth in the Australian economy. We look forward to engaging constructively with policymakers and regulators as these rules are developed.”

The penalty is a stark reminder of the growing scrutiny facing cryptocurrency exchanges globally as governments and regulatory bodies aim to safeguard consumers while addressing potential risks in the crypto market.

 

Circle Expects UK Stablecoin Legislation Within Months

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Crypto firm Circle anticipates that the United Kingdom will introduce stablecoin legislation within a timeframe of “months, not years.” Dante Disparte, Circle’s global head of policy, expressed optimism during a recent interview in London, suggesting that formal laws governing stablecoins—a type of cryptocurrency pegged to government currencies like the U.S. dollar or British pound—are on the horizon.

Legislative Outlook

Disparte believes that the U.K. is nearing a critical point in developing regulations for the stablecoin market. “I think we’re within months, not years,” he stated, while the Treasury and the Bank of England did not provide immediate comments on the matter. Disparte noted that the U.K.’s cautious approach to crypto regulation may have been wise, especially following significant events in 2022, such as the collapse of the FTX exchange, which was once valued at $32 billion.

He remarked, “You could also look back, and I think many in the U.K. and in other countries would argue that they’re vindicated in not having jumped in too quickly.” However, he emphasized that the urgency for formal stablecoin regulations has increased recently, as the U.K. risks missing out on technological benefits.

Competitive Landscape

Disparte pointed out that the U.K. must catch up with the European Union, which has initiated regulation of stablecoins under the MiCa (Markets in Crypto Assets) framework. Singapore has also established formal laws for its stablecoin industry. He argued that while protecting the U.K. economy from excessive risks in the crypto sector is crucial, delaying regulations could stifle job creation and future industries.

Among the potential benefits of stablecoins, Disparte highlighted advancements in wholesale banking, real-time payments, and the digitization of the British pound. There are ongoing discussions at the Bank of England about the possible introduction of a digital version of the pound, often referred to in the media as “Britcoin.”

Recent Developments in UK Crypto Regulation

The push for regulatory clarity on stablecoins isn’t new. Under Prime Minister Rishi Sunak, the U.K. government aimed to position Britain as a global crypto hub. Sunak’s administration previously indicated that legislation for stablecoins and crypto-related services like staking and exchange could emerge as early as June or July.

In April, the government outlined its intention to lead in the crypto space by integrating stablecoins into the regulatory framework. They responded to a consultation on crypto industry regulations last October, stating that a “phase 2 secondary legislation” would be introduced in 2024, contingent on parliamentary approval.

However, the current Labour government has been less vocal about crypto regulation compared to its predecessor. In January, the Labour Party released a financial services plan proposing to establish the U.K. as a hub for securities tokenization, which involves digital assets representing ownership of real-world financial assets.

The Stablecoin Market

The stablecoin sector has grown significantly, now valued at over $170 billion, according to CoinGecko. The largest stablecoin, Tether’s USDT, boasts a market capitalization exceeding $120 billion, while Circle’s USDC ranks second with around $34 billion in circulation.

Despite its growth, the stablecoin market has faced controversies. In 2022, USDT temporarily lost its $1 peg after the collapse of a rival stablecoin, terraUSD, raising concerns about Tether’s backing of its assets. Tether asserts that its coin is fully backed by dollars and dollar-equivalent assets, including government bonds.

Conclusion

As Circle anticipates rapid progress in stablecoin legislation, the U.K. is at a pivotal moment to enhance its regulatory framework and maintain its competitive edge in the evolving cryptocurrency landscape.