Democrats are raising concerns about a Republican-led bill concerning stablecoins, a digital asset pegged to a stable reserve asset like the U.S. dollar. Republicans, with their slim majority in Congress, have the power to pass the bill without Democratic support.
On Tuesday, Democrats criticized the bill as a giveaway that would benefit Elon Musk and cryptocurrency enthusiasts at the expense of retail traders and national security. Representative Maxine Waters, the top Democrat on the House Financial Services Committee, described the bill as removing a crucial separation between banking and commerce. She warned that this could enable large tech firms like Elon Musk’s X platform to create their own currencies, similar to Facebook’s failed attempt with its Libra stablecoin.
Libra quickly became synonymous with overreach in the blockchain sector after regulators and lawmakers raised serious concerns about its potential impact on financial privacy and stability. Facebook, now known as Meta, eventually abandoned the initiative when Libra was sold to Silvergate Bank, which subsequently collapsed in 2023.
Following significant industry contributions to pro-crypto candidates during the 2024 election, Democrats have appeared to soften their stance on digital asset regulation. For example, many Democrats recently joined Republicans in opposing a Biden-era regulation that would have required websites connected to DeFi protocols to perform customer background checks. However, Waters’ criticism signals that the Democrats’ support for crypto has limits and that they are ready to challenge legislation they believe could harm investors.
Representative Stephen Lynch, a Democrat from Massachusetts, shared similar concerns, stating the bill would allow large tech companies such as Meta and Apple to dominate the stablecoin market. He also criticized the bill’s provision to authorize stablecoin issuers to operate under state rather than federal supervision. Lynch argued that this approach would lead to a regulatory “race to the bottom,” as states would compete to attract issuers.
Despite Democratic opposition, the Republicans hold majorities in both the House and Senate, allowing them to pass the stablecoin bill. Moreover, former President Donald Trump has pledged to bring “regulatory clarity” to the crypto sector, and he released his own memecoin in January. Some crypto influencers believe a bipartisan approach is necessary to avoid the influence of Washington’s partisan division.
Anthony Scaramucci, a hedge fund investor and long-time Bitcoin advocate, asserted last month that Democrats are willing to collaborate with Republicans on well-designed legislation. Waters expressed her disappointment that her Republican colleagues were pursuing legislation without Democratic input. Last year, she worked closely with former GOP committee chair, Representative Patrick McHenry, on a bipartisan stablecoin bill. She emphasized that the earlier work “put together stablecoin [legislation] with the kind of guardrails that would avoid consumers from being ripped off.”
Republican lawmakers counter that the bill would fortify the U.S. dollar’s position as the world’s reserve currency while providing consumers with cheaper and faster ways to move money. Representative Andy Ogles, a Republican from Tennessee, described the current U.S. payment system as particularly expensive and highlighted the risks of foreign-backed stablecoins.
Republican lawmakers also criticized central bank digital currencies (CBDCs). Last week, Representative Tom Emmer, a Republican from Minnesota, introduced a bill to ban CBDCs, calling them an “Orwellian surveillance tool.” Representative Brad Sherman, a Democrat from California, responded that Emmer’s bill would undermine a public alternative to stablecoins. He stated that the major advantage of the coins being discussed is the potential profits for crypto enthusiasts.
Aleks Gilbert is DL News’ New York-based DeFi Correspondent, and he can be reached at aleks@dlnews.com.
