What The Newest Crypto Bills In Congress Mean For Stablecoins

Cryptocurrency regulation in the United States has long been marked by uncertainty, political infighting, and reactionary enforcement. However, stablecoins have emerged as the digital asset class most likely to receive bipartisan and bicameral regulatory clarity in 2025. In the past two weeks, two influential lawmakers — Sen. Bill Hagerty (R-Tenn.) and Rep. Maxine Waters (D-Calif.) — unveiled stablecoin bills in their respective chambers of Congress. Each aims to provide a structured regulatory framework for the industry in the Senate and the House.

What Are Stablecoins?

Stablecoins are a type of cryptocurrency designed to keep a steady value, usually by being tied (or “pegged”) to something stable, like the U.S. dollar or gold. This means that for every stablecoin issued, there is usually an equal amount of real-world assets held in reserve to back it up. Notably, most government-issued currencies, including the U.S. dollar, have only a fractional reserve.

In contrast, cryptocurrencies like Bitcoin, Ethereum, Ripple and Dogecoin can fluctuate in price a lot because their value depends on market supply and demand. Stablecoins are meant to avoid those wild price swings, making them more useful for everyday transactions, like sending money or making purchases, without worrying about sudden changes in value. Therefore, stablecoins can be a more viable option for new and more risk averse crypto users who may be more interested in, and comfortable with, consumer transactions instead of — or in addition to — investment.

Two Pieces Of Legislation

The Guiding and Establishing National Innovation for U.S. Stablecoins, or Genius Act, introduced by Hagerty and cosponsored by Sens. Kirsten Gillibrand (D-N.Y.), Cynthia Lummis (R-Wyo.), and Tim Scott (R-S.C.), seeks to create a clear, innovation-friendly framework while ensuring consumer protection. It embraces a state-federal regulatory balance, allowing smaller issuers to operate under state supervision while placing larger stablecoin providers under federal oversight.

Senator Gillibrand emphasized the bill’s role in protecting consumers and fostering responsible innovation in a Feb. 5, 2025 press release:

“The bipartisan Guiding and Establishing National Innovation for U.S. Stablecoins Act protects consumers by requiring stablecoin issuers to maintain one-to-one reserves, prohibiting algorithmic stablecoins, and requiring issuers to comply with U.S. anti-money-laundering and sanctions rules,” said Senator Gillibrand. “Importantly, it will empower responsible innovation, maintain U.S. leadership in digital assets and blockchain technology, and keep crypto companies and jobs onshore.”

She also highlighted the broader economic and geopolitical implications of stablecoins:

“Dollar-denominated payment stablecoins are digital assets pegged to the U.S. dollar. They can improve transaction efficiency, expand financial inclusion, and strengthen the dollar’s supremacy as the world reserve currency by driving demand for U.S. Treasuries.”

By contrast, the stablecoin bill introduced by Waters, described as the culmination of three years of bipartisan negotiation, takes a more centralized approach. The Waters bill subjects all stablecoin issuers — both banks and nonbanks — to Federal Reserve oversight. The bill also prohibits Big Tech firms from issuing stablecoins, blocks offshore companies from evading U.S. regulations, and prevents individuals convicted of financial crimes from owning more than 5% of a stablecoin issuer.

This bill represents a specific, actionable step beyond Waters’ more general August 2024 statements on technology in financial services. In a podcast interview, she said Democrats have “to move forward” with artificial intelligence and cryptocurrency if Democrats took control of the House in the 2024 election.

Competing Regulatory Visions

Together, these bills mark a significant shift in the conversation around stablecoins. The debate is no longer about whether stablecoins should be regulated, but how.

Gillibrand made the stakes clear: “The future of stablecoins and cryptocurrency has strong bipartisan support. This bill will empower responsible innovation, maintain U.S. leadership in digital assets, and keep crypto companies and jobs onshore.”

The Genius Act Approach

The Genius Act is structured to:

• Provide two regulatory paths: Large issuers with over $10 billion in market capitalization would be regulated by the Federal Reserve and the Office of the Comptroller of the Currency, while smaller issuers could opt for state-level regulation with limited federal oversight.
• Mandate strict 1-to-1 reserves: All issuers must back their stablecoins with U.S. currency, demand deposits, or short-term Treasury bills, ensuring that each digital dollar is redeemable on demand.
• Prohibit algorithmic stablecoins: This measure explicitly bans self-referential, unbacked stablecoins, preventing a repeat of the Terra/Luna collapse that erased billions in investor wealth.
• Ensure U.S. dollar dominance: The bill sponsors have consistently framed stablecoin regulation as an economic and geopolitical imperative, arguing that without clear rules, the U.S. risks losing ground to China’s digital yuan and the European Union’s comprehensive crypto framework.

Hagerty takes a state-friendly, innovation-driven approach seeks to balance financial stability with economic competitiveness, ensuring that stablecoin issuers are properly regulated without suffocating the industry.

The House Bill Approach

By contrast, the legislation introduced in the lower chamber by Waters takes a more centralized, enforcement-heavy approach. Key provisions include:

• All issuers must be federally regulated: The bill creates oversight for all issuers regardless of size, and state-level regulation is not an option.
• Big Tech is banned from issuing stablecoins: This prevents companies like Meta, Google and X from creating corporate-controlled digital currencies.
• Increased restrictions on offshore issuers: The bill closes regulatory loopholes that allowed firms like Tether to operate with minimal U.S. oversight, strengthening enforcement against noncompliant foreign entities.
• Criminal background checks for issuers: The bill prevents individuals convicted of financial crimes, including fraud and money laundering, from owning more than 5% of a stablecoin company.

Waters has framed the bill as a consumer protection measure: “This draft bill fosters innovation, while properly addressing and prioritizing concerns I have long held about safeguarding our nation’s consumers from scams that have plagued the crypto industry.”

Bridge To Mass Crypto Adoption

While institutional adoption of crypto has surged, average consumers remain hesitant to enter the space. Poor user experience, regulatory uncertainty, and a legacy of fraud and instability have created a significant trust deficit.

Stablecoins could be the first widely adopted digital financial product, serving as a low-risk entry point into crypto for mainstream users.

• Familiarity and stability: Unlike volatile cryptocurrencies, stablecoins retain a fixed value, making them more accessible to consumers unfamiliar with digital assets.
• Lower transaction costs: Stablecoins offer cheaper and faster payments and remittances, particularly for underbanked communities and those sending money internationally.
• Digital gateway for users: As stablecoins gain mainstream use, they could drive further adoption of blockchain-based financial services.

Yet without clear, consumer-friendly regulation, stablecoins will remain largely confined to institutional use, excluding the very people they were meant to serve.

Defining Moment For Stablecoins

The introduction of both the Genius Act and the Waters bill marks a turning point for digital asset regulation in the United States. With two top lawmakers proposing vastly different approaches, the final framework that emerges from Congress will shape the future of stablecoins, crypto adoption, and the global role of the U.S. dollar.

To move forward, Congress must balance consumer protection with innovation, preventing fraud without stifling competition. The crypto industry must engage proactively, advocating for a regulatory framework that fosters accessibility and trust. Finally, stablecoins must be positioned as a financial tool for all Americans, not just institutions and high net worth investors.

Stablecoins represent a critical intersection of financial inclusion, technological advancement, and regulatory oversight. As policymakers clarify and refine their approaches, a well-crafted regulatory framework could determine whether stablecoins become a widely used financial tool or remain an underutilized innovation.

Ensuring the right balance of oversight and flexibility will be key to determining whether stablecoins unlock broader crypto adoption or remain an opportunity unrealized.

Editor’s note: An earlier version of this article misstated the lead author of the Genius Act. The lead author is Sen. Bill Hagerty. The article has been corrected.