GOP—With Some Key Dem Support—Poised To Give Trump The Green Light On Crypto Schemes

Here’s an example of the kind of compromise included in the Senate’s updated crypto bill. After bipartisan negotiations this month, the GENIUS Act will now ban stablecoins from using “United States,” “United States Government,” or “USG” in their name.

In some ways, it’s important: stablecoins, typically used to purchase other, more volatile forms of cryptocurrency, are pegged to the dollar.

But, alas, they are not dollars.

That’s left a world where companies that issue stablecoins seek to project a sense of stability by naming and marketing these digital currencies as closely tied to the stability of the U.S. government. After negotiations, a handful of Senate Democrats who support the new version of the bill say that changes to it would ban certain forms of that.

But a venture by President Donald Trump shows the limitations of such a measure. A Trump-linked company has a stablecoin is called USD1. You might be mistaken, given the name and the President’s personal involvement, for thinking that it’s affiliated with the U.S. government. But it’s not, though it would slide through that one provision in the new bill.

Crypto push on the Hill

The stablecoin bill flopped earlier this month on a procedural vote, a delay prompted by a cascading series of crypto-related Trump corruption scandals. Republicans, who almost unanimously support the bill, will hold a cloture vote tonight, Senate Majority Leader John Thune (S-ND), said on Monday. The critical new vote comes after negotiations that, some Democrats say, yielded compromises.

Some Democrats who plan to vote for the legislation touted the ban, among others, in a summary of “negotiation wins” that is being circulated on Capitol Hill. TPM obtained that memo, along with drafts of the legislation.

And while it’s not clear yet if Republicans have secured the Democratic support they need — or, if they haven’t, what final form the bill will take — the drafts have sparked criticism that the latest version of the bill does little to address President Trump’s ongoing, brazen crypto-involved corruption schemes. Those involve an Emirati firm using Trump’s USD1 to close a $2 billion investment; the chief executive’s family and friends deeply involved at every level of the company issuing the stablecoin; and top holders of $TRUMP coin, a non-stablecoin asset, gaining access to the President. It’s a potpourri of graft, the brazenness of which would make Gilded Age wheeler-dealers blush.

Critics say that changes in the legislation, which some Democrats are trumpeting as allowing them to vote for the package amid the Trump corruption, are mere window dressing.

“They look like they are making significant changes, but they are cosmetic,” Mark Hays, Associate Director for Cryptocurrency and Financial Technology at Americans for Financial Reform, told TPM.

Sen. Cynthia Lummis (R-WY) said last week at an event hosted by a crypto advocacy group and moderated by Semafor that she expected the stablecoin bill to pass by Memorial Day. That prediction was met with cheers from the audience.

At the same event, Sen. Kirsten Gillibrand (D-NY), the first Democrat to co-sponsor the bill, replied to a question about Trump’s corruption by noting that the stablecoin law would apply to him, as well.

“If some family member chooses to do so, or if [President Trump] chooses to do it in a blind trust, he is obligated to follow all the same rules as any other participant,” she said.

The ‘wins’

Some of the questions the bill hopes to address are typical for new industries and technologies. The GENIUS Act, the vehicle for stablecoin regulation, will be only the first bill to deal with the issue; a piece of legislation on market structure is expected to hit the Senate floor this summer.

All of the Trump corruption has collided with a larger question for Congress: as more people adopt, invest, or gamble with crypto, what should the government do? Should it accept that crypto is here to stay, and find ways to regulate the industry? Should it tighten regulations, or leave them loose to embrace what crypto boosters describe as a realm of technological innovation? Should it follow critics and treat digital currencies as useful only for money laundering and speculation?

The Republican majority in Congress is pushing for a light touch to the substantive questions of how to regulate digital assets. In the Senate, they need at least seven Democrats to vote for the legislation.

Amid an intra-party fight on the bill, several Democrats have already lined up to signal their support: in addition to Gillibrand and Sen. Angela Alsobrooks (D-MD) — the bill’s Democratic sponsors — Sen. Mark Warner (D-VA) said on Monday he will vote for the bill. Meanwhile, Democratic staff on the Sen. Elizabeth Warren-led Senate Banking Committee put out an analysis blasting the bill.

“Under the latest revised draft text: Elected officials and their families, including President Trump and his family, are not prohibited from owning or participating in stablecoin business ventures. Instead, the bill will turbocharge President Trump’s ability to benefit from his crypto deals,” the Senate Banking Committee Democratic staff analysis read.

On the non-Trump questions, the changes to the bill, per the documents that TPM obtained, could still leave open significant questions around what kind of companies can issue stablecoins, and what happens in the event of insolvency. Per the bill, federal regulators are required to study and issue a report on “existing gaps” in bankruptcy law as they apply to the new assets.

One fight has been over whether big tech firms can issue stablecoins. It’s been tried before: in June 2019, Meta announced that it would launch a coin called “Libra,” pitching it as an alternative to the global financial system. That effort foundered amid regulatory concerns and criticism over the amount of power that it would concentrate in Meta.

Some of the recent changes to the bill would force publicly traded companies like Meta and others to receive approval from a new body called the Stablecoin Certification Review Committee before being able to issue the coins. The committee will be composed of top regulatory officials, including the Treasury Secretary, Federal Reserve chair or vice chair, and the head of the FDIC.

Apart from all the Trump issues, it raises questions about whether the bill will allow these companies to continue to morph into something like financial institutions, where people store money in the form of stablecoins absent the kinds of protections normally and formally granted to bank deposits, Hilary J. Allen, a professor at the American University Washington College of Law who studies securities regulation, told TPM.

“Do they become too-big-to-fail financial institutions with all the power and the implicit bailouts that come with that?” she said.