A promising bipartisan effort to bring regulatory clarity to the booming stablecoin market has hit a sudden and potentially fatal snag in the U.S. Senate, with Democratic lawmakers pulling back support from a revised bill they say falls short on vital protections.
At stake is the first federal framework to regulate stablecoins—blockchain-based tokens backed by fiat currencies like the U.S. dollar. With these coins now facilitating billions in daily crypto transactions, the stakes for regulation have never been higher.
Originally co-sponsored by Sen. Bill Hagerty (R-Tenn.) and Sen. Kirsten Gillibrand (D-N.Y.), the legislation had made it out of the Senate Banking Committee with rare bipartisan approval earlier this year. But momentum has now stalled after the GOP unveiled revisions that Democratic lawmakers say dilute critical anti-money laundering provisions and overlook regulatory risks associated with foreign stablecoin issuers.
Lawmakers Slam Revised Draft as Weak on Oversight
Nine Senate Democrats issued a coordinated response over the weekend, calling the new draft a “step backwards” that ignores key elements they had previously negotiated in good faith.
Leading the charge, Sen. Ruben Gallego said the bill’s current form “fails to deliver the strong protections American consumers and our financial system need.”
He accused Republicans of pushing for a floor vote without fully incorporating Democratic feedback, a move he characterized as politically opportunistic amid Trump’s vocal support for expanding stablecoin infrastructure.
The latest version drew even more scrutiny after it emerged that a $2 billion investment deal—backed by Abu Dhabi and linked to a Trump-affiliated stablecoin platform—was using the bill’s momentum to attract institutional capital.
Sen. Elizabeth Warren seized on the issue, calling for a deeper probe into the financial relationships between Trump-linked crypto ventures and foreign governments. “We should not be writing crypto laws while the Trump family is cutting massive international deals with digital assets at the center,” Warren warned.
Senate Majority Leader Presses Pause
Insiders say Senate Majority Leader Chuck Schumer held a closed-door session last week where he warned colleagues to withhold support from the bill until more robust compliance mechanisms were added.
Of the five Democrats who supported the original version, four have now walked away. Without their backing, the GOP’s path to the 60 votes needed for Senate passage looks increasingly narrow.
Still, negotiations continue behind the scenes, with aides to Sen. Gillibrand and Hagerty reportedly working on new amendments to address Democratic concerns without alienating the crypto industry.
Gillibrand remains optimistic. “We need to regulate the industry, not let it run wild. But we can’t delay forever,” she said. “Each day without a framework is a day U.S. companies risk losing ground to overseas competitors.”
Stablecoin Adoption Continues to Accelerate
Even as lawmakers argue over regulation, the stablecoin market is charging ahead. A Citigroup report projects a tenfold growth by 2030, fueled by the increasing use of stablecoins in remittances, trading, and institutional settlements.
The market cap, currently at around $240 billion, could exceed $2 trillion by the end of the decade, according to Citi’s estimates. The number of wallets using stablecoins has also risen sharply, with a 53% increase in active addresses over the past 12 months.
As global competition heats up and Asia and Europe roll out their own regulations, the U.S. risks falling behind without a clear and enforceable law. Whether or not the Senate can break the current deadlock will shape not just the domestic crypto landscape, but the future of financial infrastructure on a global scale.
