The Breakdown - Senate Clears Stablecoin Bill Hurdle

Episode Date: May 21, 2025

In a major breakthrough for crypto legislation, the U.S. Senate voted 66-32 to advance the Genius Act—marking the most significant step yet toward stablecoin regulation. NLW breaks down what flipped Democratic support, why Elizabeth Warren fought to the bitter end, and what’s next as the bill moves toward a final vote. Plus, Circle is reportedly exploring a $5B sale instead of going public, raising new questions about the future of USDC, its partnership with Coinbase, and the impact of looming regulation. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Tuesday, May 20th, and today we are catching up on the stable coin vote in the Senate. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Well, friends, a big update yesterday, the Senate has voted to advance the stablecoin bill, removing the last major roadblock for the legislation. In a late session last night, the Senate voted 66 to 32 to pass a procedural motion allowing the bill to move to a final vote.

Earlier in the day, Politico reported the vote had a strong chance of getting over the line. Democrat Senator Mark Warner had flipped and was now encouraging his colleagues to vote for the bill. He told the press, many senators, myself included, have very real concerns about the Trump family's use of crypto technologies, but we cannot allow that corruption to blind us to the broader reality. Blockchain technology is here to stay. We have a responsibility to ensure it happens safely, transparently, and in a way that advances U.S. economic and national security interests. The Genius Act will help us get started.

This, by the way, speaking from a political strategy perspective, not a politics perspective, so again, I'm not endorsing any one point of view, but I'm just commenting on what I think the efficacy of a position is. I think Democrats are going to have a lot more success. with this line than with the obstructionist walk out of the room line. Saying, look, we don't like this thing. We find it to be an example of corruption, but we're not going to hold up the whole world because of that. In fact, if anything, this makes us feel like it's more important to push for clear common sense rules of the road that allow people to build and build real exciting things. It's just a

much more optimistic, future-oriented, get-things done kind of positioning. In any case, the Senate version of the Stablecoin bill known as the Genius Act had obviously hit a road. block over the past few weeks. The bill failed to hit the 60-vote threshold to move forward in a prior vote at the beginning of the month. Democrats' support fell apart over complaints about President Trump's crypto businesses and Republicans were ninging on negotiations. Reports stated Democrats were looking for stronger compliance and tighter restrictions on tether offering their stable coin to U.S. investors. Republican Senators Josh Hawley and Rand Paul also previously voted against the bill, citing on the part of Holly concerns around big tech issuing stable coins and on the part of Paul

over-regulation. Ahead of the vote, stand with crypto, put senators on notice that they would be scoring the lawmakers and considering this a key vote. They said that 60,000 advocates had contacted their representatives on the issue. Last night's vote, however, saw strong support from the Democrats. Ruben Gallego, who had been the poster boy for spoiling the previous vote, gave his support. 16 Democrats in total voted for the bill, including Kirsten Gillibrand, Adam Schiff, and Corey Booker. Senate leader Chuck Schumer was notably not on the list of Democrats who voted for the bill.

Rand Paul maintained his disapproval, joined by Jerry Moran on the Republican side, but Josh Hawley flipped his vote, likely because changes introduced by Democrats addressed his concerns about big tech. Once again, I will say that the moves and shifts in position here affirm what I talked about a lot last week, especially with Scott Melker, that it had felt like the big pocket of Democrats that weren't walking out of rooms were actually still wanting to move this forward, just with some changes. In any case, the vote was filled with tension as crypto policy nerds stayed locked to the C-SPAN coverage.

Elizabeth Warren lingered on the Senate floor watching each of her colleagues cast their vote. At one stage, she got into a heated argument with Kirsten Gillibrand, one of the Democrat co-sponsors of the bill. Warren also gave a lengthy speech and circulated a staff analysis, urging Democrats to project the bill ahead of the vote. I'm sure we will get an open letter to know one soon, so that we can all enjoy her thoughts as well. Overall, this felt like the last stand for the anti-crypto army and Warren gave it her all. As the final votes came in, Democrat Senator Raphael Warnock flipped his vote from yes to no, taking the tally back down to 59 and below the threshold, although this ultimately turned out not to matter, with several other Democrats coming in to support the bill, still, for a moment,

it was a close call. When the results were announced, Warren stood by, arms folded and visibly furious. After securing the vote, Kirsten Gillibrand told the press, this cloture vote represents a major milestone in our bipartisan effort to regulate stable coins. I'm confident that we have produced a strong regulatory framework that will position our country for the future, and I look forward to seeing it signed into law. Now, looking ahead, the Senate will now vote on the bill itself, but it only needs a simple majority to pass. The House bill will also need a floor vote, but can presumably pass easily in the Republican-controlled chamber. It remains to be

seen how the two bills will be reconciled, but it seems likely the concessions in the Senate will become the final law. Alex Thorne of Galaxy Digital commented, big victory getting close around the Genius Act tonight in the Senate. Bill now goes to the floor for amendments and debate, but this was the key hurdle. As far as the contents of the bill go, there are still a few divisive elements in the crypto community. There is a slightly convoluted provision to keep Heather out of the U.S., which finance lawyer Scott Johnson is skeptical will actually work. Paying interest to customers is banned. This was a big one. Big tech firms are barred from issuing their own stable coins, and banking licenses are required, which could limit competition. There's also a requirement for KYC and anti-money laundering compliance

for centralized entities dealing with stable coin transactions. Frankly, a lot of what Democrats wanted is in this bill now. And so it's encouraging to see that at least they were being serious about the things that they wanted and are now supporting it. Looking at the big picture still, the bill is now over the hump and providing momentum to get the rest of the crypto agenda done this year. Circle CEO Jeremy Aller tweeted, tonight's vote on Genius Act is a huge step forward in advancing dollar digital currency as the foundational layer of the internet financial system. What an incredible milestone for our industry as this deeply fundamental building block helps to cement the United States as a major global leader in crypto and digital assets.

Ryan Selkis sees the dominoes saying, Stable coins are a Trojan horse. The whole financial system will go on chain once the global reserve and its well-regulated treasury market is fully onboarded. The Genius Act was always the critical first step. More wins will follow.

Ultimately for me, there were two battles going on. Battle one was, of course, around stable coins, but battle two was about the business of politicking right now. On the one side, you had Warren, and more passively Schumer, engaged in a strategy of machine obstructionism, basically. On the other side, you had Senator Kirsten Gillibrand, whipping crossover votes, and making common sense policy move forward.

The fact that Gillibran won this one is more than just good for crypto. It's good for suggesting that there's a path forward when it comes to any legislation. Now, the other big story for today is that Circle is now apparently looking to sell rather than go public. Fortune reports that Circle is courting an acquisition deal, citing banking and private equity executives as sources. They're looking to get at least $5 billion for the company, which is the same valuation they were seeking at the IPO. The report stated that Circle had held informal talks with Coinbase

and Ripple. One source said, if Coinbase wanted to buy them, Circle would sell in a heartbeat. Another commented that, quote, things change week by week. Sources also said that Circle is still committed to going public, but has yet to set the terms for their IPO and begin the roadshow to market the stock to institutional investors. Now, to many observers, Coinbase acquisition would make perfect sense given the close ties between the companies. Circle has a 50-50 profit-sharing agreement with Coinbase for all USDC issued. The exchange also receives 100% of revenue for USDC held on the platform. In total, this deal means that Coinbase is seeing more revenue from the stable coin than Circle is.

Coinbase uses the revenue to pay rewards to holders so it still doesn't flow through to huge profits, but the deal was enough to make analysts question how attractive Circle's business model really is when the numbers were revealed last month. Beyond revenue sharing, Circle is barred from forming other distribution partnerships, and Coinbase has a right to control over intellectual property in the event of an insolvency. One source commented, I feel like they're one company. The other reported bidder is Ripple, who are attempting to make some big moves this year. The company launched their own Stablecoin in December and is trying to sign distribution deals to hit scale.

The stable coin currently has a $312 million market cap, making it slightly smaller than the Peanut the Squirrel meme coin. Bloomberg reported in April that Ripple had already made an offer to acquire a circle at $4 billion, which was rejected for being too low. The issue is that Ripple doesn't have anywhere close to $5 billion in cash, so it would presumably need to pay using XRP token. They hold around $12 billion in XRP on their balance sheet, and another $95 billion worth of the token in escrow accounts that unlock monthly over three and a half years. I will leave it to you guys to determine if there's enough liquidity to monetize $5 billion in XRP. A Coinbase acquisition, on the other hand, would be consummated as a more normal cash

and equity deal. Coinbase has $8 billion in cash on their balance sheet, so could write the check tomorrow if they were so inclined. A banker commented that Ripple had a, quote, pretty meaningful balance sheet, but a Coinbase deal would still be viewed more favorably. The big question will be whether Coinbase actually wants to do the deal. In an interview last week, CEO Brian Armstrong said, They're going public doesn't change anything about our commercial relationship, but in terms of other deals we might consider in the future, I mean that, of course, would be up to them and us,

but, you know, nothing to announce today, which is a non-answer if ever I've seen one. Most people are looking at the meta-analysis of the reporting, with it being pretty clear that this is not a company barreling towards a successful public listing following behind E. Toro. Investor Maya's a hobby commented, The fact Circle is shopping around for an acquisition right now before a stable coin bill says a lot. As we've discussed before, the introduction of this legislation

could actually be negative for Circle as more players enter the market and their position between the highly unregulated tether and the even more regulated than them banks looks like increasingly narrow space. Speaking of tether, the company is now a larger holder of U.S. debt than Germany. The stable coin issuer now holds $120 billion

in U.S. treasuries, according to their latest attestation report. If they were a country, they would be the 18th largest holder of U.S. debt behind South Korea. In the report, the company wrote, this milestone not only reinforces the company's conservative reserve management strategy, but also highlights Tethers's growing role in distributing dollar-denominated liquidity at scale. Tether claims that they were the seventh largest buyer of U.S. treasuries in 2024, compared to nation-states behind France, Singapore, the U.K., Belgium, Luxembourg, and the Cayman Islands.

This mix of tax shelters and stablecoin issuers demonstrates the U.S. is now relying on investors rather than central banks to fuel demand for newly issued debt. A separate stack getting passed around this week is that stable coins now represent 1.1% of U.S. M2 money supply. M2 includes all bank deposits, money market funds, and cash. Stable coins are growing much faster than M2, adding 30% in market cap this year. P.J. of Alliance Dow tweeted, we'll see them at 2% of global money supply by 2026. Mike Dutas of Sixth Man Ventures commented, slowly, slowly, then all at once. So that is the reporting from here, although I think that there are some pretty meaningful constraints in this Genius Act. If you are looking for signs that the political process can

actually deliver wins and can meaningfully advance crypto legislation forward, you got to look at this as nothing but a huge, huge win. For now that that is going to do it for today's breakdown, appreciate you listening as always, and until next time, be safe and take care of each other. Peace.