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Although US lawmakers appear to be aligned on the need for federal stablecoin legislation, they are no closer to an agreement on which bill should prevail and what provisions it should include.
In the past week, lawmakers in both the House of Representatives and the Senate have introduced bills that are among the leading contenders to bring federal stablecoin regulation to the US.
Led by Senator Bill Hagerty (R-TN), a group of bipartisan lawmakers on the Senate Banking Committee reintroduced the Guiding and Establishing National Innovation for US Stablecoins Act.
Also known as the GENIUS Act, the bill is co-sponsored by committee chair Senator Tim Scott (R-SC), alongside Senators Cynthia Lummis (R-WY), Kirsten Gillibrand (D-NY) and Angela Alsobrooks (D-MD).
Their updated version of the bill makes several key changes to the original version, introduced in February.
In the original bill, non-authorised issuers were prohibited from issuing stablecoins within the US, but those same stablecoins could still be used within the US.
This loophole would benefit offshore stablecoin issuers, such as Tether, allowing them to serve the US market without authorisation from US authorities.
In the latest version of the bill, this loophole has been tightened, although not completely closed.
Unauthorised stablecoins could still be used within the US, but they could not be used to settle or facilitate wholesale payments between banks.
In effect, this means that offshore stablecoins could still be used in crypto trading (currently their main use case) and could also be used in retail payments.
In another new addition, offshore stablecoins would be permitted for use within the US only if the issuer can demonstrate that it has the "technological capability” to comply with US law enforcement orders.
Should an offshore stablecoin issuer fail to comply with such orders, it would be given 30 days to remediate the non-compliance.
After 30 days, if the non-compliance continued, the stablecoin issuer could be fined up to $1m per day, and the Treasury secretary may seek a court order to prohibit further transactions within the US or with US persons.
Finally, the President would retain the authority to issue a waiver of these restrictions on national security grounds.
Senator Scott said the updated legislation is the result of negotiations with stakeholders, industry and members of both parties.
Aside from these changes, the headline provisions of the original bill are largely intact.
The GENIUS Act would introduce a dual system of authorisation and supervision for issuers of systemic versus non-systemic stablecoins.
For stablecoins with more than $10bn in market cap, the Federal Reserve would be authorised to create a supervisory framework for issuers that are depository institutions.
For issuers that are non-banks, the Office of the Comptroller of the Currency (OCC) would be authorised to create a regulatory framework.
Issuers of stablecoins with a market cap of less than $10bn would be supervised by state authorities.
However, even for stablecoins that exceed $10bn in market cap, the GENIUS Act includes a waiver that would allow their issuers to remain under state supervision, provided that the state regulation is “substantially similar” to its federal equivalent.
STABLE will not concede to GENIUS
The main competition to the GENIUS Act is the Stablecoin Transparency and Accountability for a Better Ledger Economy Act, also known as the STABLE Act.
Like the GENIUS Act, the STABLE Act was also reintroduced to Congress this week, following “extensive” feedback from industry stakeholders.
The lead sponsor of the STABLE Act is Representative Bryan Steil (R-WI), chair of the Digital Assets Subcommittee, and it is co-sponsored by Representative French Hill (R-AR), chair of the House Financial Services Committee.
Unlike the GENIUS Act, the STABLE Act is not a bipartisan piece of legislation, and continues to be strongly opposed by Democrats on both committees.
The latest version of the STABLE Act includes several changes from the original, but none of the changes are as significant as those in the updated GENIUS Act.
For example, the current version of the STABLE Act lowers the maturity limit of Treasury bills that are permitted as reserve assets from 90 days to 30 days, and adds money market funds as eligible reserve assets.
The updated bill also clarifies that, within one year of its enactment, state stablecoin regulators must seek certification from the secretary of Treasury that their state framework meets or exceeds the capital, liquidity, risk management and other requirements outlined in the bill.
Although the STABLE Act also proposes a dual framework for stablecoin regulation, it does not specify a particular threshold at which a stablecoin should graduate from state to federal supervision.
The penalties outlined for violations of the STABLE Act remain relatively weak, as they were in the original bill.
For example, criminal penalties would only be applied to CEOs and CFOs who “knowingly” submit false information in attestations to regulators, while civil penalties of up to $100,000 per day could be issued to entities that issue stablecoins without authorisation.
In contrast, the GENIUS Act threatens penalties of up to five years in prison for issuing stablecoins in the US without authorisation, and fines of up to $1m per violation.
The pro-STABLE and anti-STABLE camps
The STABLE Act appears to have strong support from industry stakeholders. As covered by Vixio, Tether CEO Paolo Ardoino has said he worked personally with Representative Steil to develop the bill — a claim that was confirmed by Steil.
Charles Cascarilla, co-founder and CEO of stablecoin issuer Paxos, also said in a Congressional committee hearing that he “strongly” supports the STABLE Act.
The most vigorous opposition to the STABLE Act currently comes from Democratic lawmakers.
Representative Stephen Lynch (D-MA), ranking member of the Digital Assets Subcommittee, said that calling the bill the “STABLE Act” is like calling the Titanic “unsinkable”.
Lynch said he has “grave concerns” that the bill would effectively offer an open invitation to big tech firms, such as Apple and Meta, to “coin their own money” in the form of stablecoins.
Representative Maxine Waters (D-CA) voiced similar concerns, noting that the bill would directly benefit digital asset companies, such as Tether, that are allied to President Trump.
She proposed instead that the House consider her bipartisan Waters-McHenry bill on stablecoin regulation.
However, its chances of passing now look extremely limited, verging on the impossible, in the current Republican-dominated Congress.
