Consumer advocates decried the Senate Banking Committee’s passage today of a flawed bill – S. 919, the GENIUS Act – that would legitimize a risky class of crypto assets known as stablecoins and embed them more deeply into the banking system.
In a letter sent to Congress today, more than 20 state and national groups raised alarms over two bills — the STABLE Act in the House and the GENIUS Act in the Senate — that attempt to create a new regulatory framework for so-called stablecoins.
The crypto industry’s Republican allies have introduced retrograde legislation to normalize the crypto assets known as stablecoins. This comforting moniker for a particular class of crypto assets is largely a public relations ploy that obscures their inherent risks. They really should be called un-stablecoins. However, they are a critical component of the crypto industry’s digital casino. And the crypto industry expects a huge return on its $130 million electoral spending spree. As such, passing this legislation would anoint stablecoins with federal imprimatur, exposing more crypto investors and the entire economy to more risk and instability.
This month, Congress has held hearings discussing so-called debanking of crypto firms and a purported golden age of digital assets. The congressional Republicans are doing this to cozy up to the wealthy venture capital and crypto industry donors who claim — without substantive evidence — that regulators pushed banks to deny crypto firms access to banking services because of politics.
Days before taking the oath of office, Donald Trump and his family launched a new cryptocurrency token — known informally as a meme coin — called $TRUMP, as the crypto industry held an inaugural ball. Despite scant details about the coin’s value, use, or risks, trading took off, sending the coin’s price skyrocketing.
Last December, Alex Mashinsky, the founder and former CEO of the crypto lender and trading platform Celsius Network, pled guilty to federal fraud charges and agreed to surrender $48 million in illegal gains from his schemes. Mashinsky admitted he misled customers about the safety of their investment accounts and used their funds to manipulate the price of Celsius’s in-house token.
While the crypto industry is hoping for a more friendly regulatory environment, Mark Hays, associate director for cryptocurrency and financial technology at watchdog group Americans for Financial Reform, warned that there are risks from this.
This week, a chapter closed on one of the more outlandish crypto crimes we’ve seen (which is saying a lot for crypto): a couple of internet influencers pulled off a massive crypto heist that fueled their lavish lifestyle, leading to the Department of Justice’s largest asset seizure in history.
“Almost all of the money that was spent in the elections came from a handful of wealthy donors from Silicon Valley,” said [Mark] Hays, [senior policy analyst] with American for Financial Reform. “They did not come from rank-and-file voters.”
“It means that people are going to be more vulnerable to an industry that is rife with fraud, abuse, market manipulation and cyber-breaches,” said Patrick Woodall, the managing director for policy at Americans for Financial Reform, which advocates for stronger financial regulations. “This is an industry that is extremely volatile, where people take big losses, where market manipulation by insiders is very prevalent.”