U.S. Senator Warns Crypto Industry Against Weak Stablecoin Rules

U.S. Senator Kirsten Gillibrand (D-N.Y.) cautioned the crypto industry against pushing for a diluted version of the bipartisan stablecoin legislation currently advancing in the Senate. Speaking at the D.C. Blockchain Summit, Gillibrand emphasized that strong regulation is vital to prevent financial crises similar to the collapse of FTX in 2022 and the Silicon Valley Bank run in 2023.

The proposed legislation, known as the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins), includes strict consumer protections in the event of stablecoin issuer bankruptcies. Gillibrand warned that improperly backed stablecoins—such as those backed by hard-to-liquidate short-term Treasuries—could trigger devastating runs, undermining investor trust and market stability.

She stressed the dangers of underregulated digital assets, likening poorly designed algorithmic stablecoins to “another FTX,” warning they pose systemic risks to the U.S. economy. “Watering down this bill won’t help your industry — it’ll destroy it,” she said.

Momentum around stablecoin legislation is building. The Senate Banking Committee has already advanced the GENIUS Act, and a companion House bill is expected soon. If passed, this legislation could pave the way for broader crypto regulation.

Gillibrand noted that progress on stablecoin regulation increases the likelihood of passing a comprehensive market structure bill, which would clarify whether digital assets are securities or commodities. This would define oversight responsibilities between the SEC and CFTC.

On the same panel, Sen. Bernie Moreno (R-Ohio) argued that any digital currency with a centralized issuer should be considered a security. He pushed to pass the GENIUS Act before Congress’ August recess. Gillibrand expressed optimism about stablecoin legislation passing by April, underscoring bipartisan urgency to provide clear rules for the growing crypto market.