The U.S. Senate’s long-awaited stablecoin regulation bill has hit a major roadblock, casting uncertainty over the future of digital dollar-backed assets and leaving one of Donald Trump’s key financial policy goals hanging in the balance.
The legislation, which aims to provide the first federal regulatory framework for stablecoins, has been met with unexpected resistance from a coalition of nine Senate Democrats who, despite previous support, now oppose the bill’s revised version introduced by Republicans last week.
The bill, co-authored by Sen. Bill Hagerty (R-Tenn.) and supported by Sen. Kirsten Gillibrand (D-N.Y.), was initially seen as a landmark effort to bring much-needed oversight to a fast-growing sector. Stablecoins—digital tokens pegged to fiat currencies like the U.S. dollar—have become essential to global crypto trading, cross-border payments, and even central bank discussions around digital currencies.
Democrats Sound Alarm on Weakened Protections
But over the weekend, the effort suffered a major blow when Senate Democrats issued a joint statement criticizing the updated draft. The group, which includes moderate and progressive members, argued that the bill had significantly weakened essential safeguards related to anti-money laundering (AML), systemic risk mitigation, and regulatory accountability.
Senator Ruben Gallego (D-Ariz.), one of the bill’s initial supporters, emerged as a leading voice of opposition, stating that Republicans had “backpedaled on progress we worked hard to achieve.”
“The revised text ignores key security issues, lacks sufficient oversight of foreign-based stablecoin issuers, and attempts to force a vote without bipartisan consensus,” Gallego said. “That’s unacceptable.”
According to aides close to the negotiations, concerns intensified after a closed-door Democratic caucus led by Senate Majority Leader Chuck Schumer, who urged senators not to commit to the current version. Schumer raised concerns about the bill’s provisions that might inadvertently give legitimacy to foreign operators like Tether without adequate regulatory scrutiny.
Senator Elizabeth Warren, long a critic of the crypto industry, took the matter a step further. She warned that a $2 billion UAE-backed investment into a Trump-affiliated stablecoin platform posed a serious conflict of interest.
“You don’t rubber-stamp legislation that could financially benefit a former president’s family while they’re actively expanding their own crypto empire,” Warren said.
Republican Defense and Continuing Negotiations
Despite the backlash, Sen. Gillibrand defended the draft, emphasizing that regulation—not stagnation—was the key to addressing potential abuse and ensuring U.S. leadership in the crypto sector.
“We can’t afford to fall behind on crypto oversight,” she said. “This bill brings structure, and structure brings safety.”
However, with four of the five Democrats who supported the bill in March now reversing course, Republicans face an uphill battle to gather the 60 votes needed to pass the legislation in the Senate. Still, sources say bipartisan negotiations remain active, and lawmakers on both sides are hoping to rework the bill before the summer recess.
Stablecoin Market Forecasted to Soar Tenfold by 2030
While Capitol Hill debates policy, the market shows no signs of slowing down. Citigroup recently projected that the stablecoin market could explode from its current valuation of $240 billion to over $2 trillion by 2030, driven largely by institutional adoption and favorable regulatory frameworks.
In its base-case scenario, the firm sees the supply of circulating stablecoins reaching $1.6 trillion, while its bullish estimate places the number as high as $3.7 trillion.
Furthermore, user adoption is booming. The number of active stablecoin wallets jumped 53% year-over-year, highlighting consumer trust and utility, even amid legislative limbo.
If lawmakers succeed in passing a robust and transparent framework, the U.S. could solidify its leadership in the global digital currency ecosystem. If not, industry leaders warn, innovation may shift overseas.
