The inaugural hearing of the Senate Banking, Housing, and Urban Affairs Committee’s panel on digital assets took a stab at legislation that would regulate the crypto market while prioritizing the stability of stablecoin and consumer protection.
Led by Chairwoman Cynthia Lummis, R-Wyo., a longtime digital asset enthusiast, the hearing on Wednesday centered around legislation introduced earlier this month by Lummis and Sens. Bill Hagerty, R-Texas, and Kirsten Gillibrand, D-N.Y. The bill aims to create a clear regulatory framework for stablecoin and other regulatory needs.
Stablecoin is a class of cryptocurrency tied to a stable asset, such as the U.S. dollar, which reduces price volatility and can be used for payments, trading, and decentralized finance.
“This industry needs clear rules of the road that it can follow while simultaneously promoting both responsible innovation and protecting consumers,” said Sen. Lummis during opening remarks.
Lummis, Hagerty, and Gillibrand’s legislation dubbed the GENIUS Act would establish a Federal licensing and supervisory framework for stablecoins and their issuers, while also allowing for state regulation of issuers under a certain limit in market capitalization.
Sen. Ruben Gallego, D-Ariz., the subcommittee’s ranking member, said he supported the crypto industry, noting it can “enhance financial inclusion, streamline transactions and spur economic growth.” However, he warned against other digital assets such as meme coins – cryptocurrencies inspired by internet trends and driven by social media – saying that Congress must “incentivize good behavior and mitigate risk.”
“The growth of things like meme coins on everything from Trump to DOGE to Peanut the Squirrel are about flashy headlines and trending on social media, and they are not about helping traditionally underbanked communities gaining access to the financial system,” said Sen. Gallego.
Witnesses at the hearing emphasized the need for clear and strong regulations of secondary trading of digital assets and market structure to ensure consumer protection and market integrity.
Jai Massari, the chief legal officer at Lightspark, told senators that stablecoin should be backed one-to-one with “high quality” liquid assets, issuers should compete on innovative payment use cases compared to reserve design, and that legislation should focus on addressing financial crimes, enforcing compliance, and maintaining privacy.
Meanwhile, Timothy Massad, a research fellow and director of digital assets policy project at Harvard University, said that the GENIUS Act lacks the strength of regulatory requirements used by European countries.
Massad critiqued the GENIUS Act, noting that it needs stronger prudential rules, a dedicated stablecoin bankruptcy process, stricter financial crime enforcement, and tougher penalties for offshore issuers. He also warned against premature market structure reforms, suggesting a focus on stablecoin while deferring structural legislation “for several years.”
The first hearing follows the signing of an executive order by President Donald Trump during the first days of his new administration that aimed to bolster the cryptocurrency market and expand the use of U.S. dollar-backed stablecoins “worldwide.” The crypto market historically hasn’t been the top priority of Congress and the Federal government, though the new administration has signaled that will likely change over the next four years.
