Democratic lawmakers demand stricter AML controls in the GENIUS Act, delaying critical stablecoin legislation and complicating Biden’s crypto strategy amid surging transaction volumes.
House Democrats halted progress on the GENIUS Act this week by proposing real-time auditing requirements for stablecoin issuers, as Coinbase warns of offshore dominance amid regulatory delays.
Legislative Deadlock Over AML Provisions
House Financial Services Committee Democrats introduced amendments on 10 June 2024 requiring issuers to implement real-time anti-money laundering audits through blockchain analytics tools. This directly challenges Republican-backed language permitting traditional banks to issue stablecoins with existing Bank Secrecy Act compliance frameworks.
Federal Reserve’s Position Draws Criticism
Federal Reserve Chair Jerome Powell stated during a 12 June press briefing: ‘Bank-issued stablecoins benefit from established supervisory relationships, reducing systemic risks.’ Crypto advocates like Caitlin Long countered this view, noting that Fed-approved institutions currently control less than 8% of the $162B stablecoin market according to CoinMetrics data.
Market Reactions and Offshore Shifts
Coinbase CEO Brian Armstrong revealed during a 11 June CNBC interview that 34% of the exchange’s institutional clients have increased Tether allocations since March 2024, citing regulatory uncertainty. Tether’s reserves reportedly grew by $12B in Q1 according to attestation reports.
Historical Precedents in Crypto Regulation
The current stalemate mirrors 2021 debates over crypto provisions in the Infrastructure Investment Act, when last-minute amendments about broker definitions caused similar partisan clashes. Earlier this year, the EU’s Markets in Crypto-Assets (MiCA) framework demonstrated cross-party consensus by implementing phased compliance deadlines through 2025.
Broader Implications for Digital Assets
As Treasury Department officials confirm stablecoins facilitated 58% of crypto transactions in Q1 2024, industry analysts warn that prolonged delays could replicate the 2017 ICO boom’s regulatory vacuum. The Blockchain Association’s recent voter sentiment data suggests public pressure might force legislative action before November elections.
