Hawley breaks with Republicans to oppose a major crypto bill

Miami Herald

16 hours ago

While the clash between Elon Musk and President Donald Trump captivated Washington on Thursday, another drama was playing out behind closed doors over a bill to regulate the $250 billion market for stablecoins, which could transform America's relationship with the dollar, upend the credit card industry, and benefit both Musk and Trump.
The bill, the GENIUS Act, is poised to pass the Senate within days. But a prominent Republican, Sen. Josh Hawley of Missouri, said that he will vote against the bill in its current form, warning that it would hand too much control of America's financial system to tech giants.
'It's a huge giveaway to Big Tech,' Hawley said in an interview. Hawley, who previously voted against the bill, is concerned that the legislation would allow tech giants to create digital currencies that compete with the dollar.
And he fears that such companies would then be motivated to collect even more data on users' finances. 'It allows these tech companies to issue stablecoins without any kind of controls,' he said. 'I don't see why we would do that.'
Similar worries scuttled an effort by Meta to get into stablecoins. In 2019, Jerome Powell, chair of the Federal Reserve, among others, raised 'serious concerns' about Meta's cryptocurrency initiative, called Libra and then Diem. It abandoned the project in 2022.
The GENIUS Act has exposed divisions in both parties. Democrats like Sen. Elizabeth Warren of Massachusetts oppose the bill, warning it would make it easier for Trump, whose family announced its own USD1 stablecoin in March, to engage in corrupt practices.
But Sen. Kirsten Gillibrand, D-N.Y., a co-sponsor of the bill, has argued that it would provide regulatory clarity to the industry, and contends that the legislation includes 'robust consumer protections.'
Sen. Bill Hagerty, R-Tenn., a co-sponsor, said the bill would bolster demand for U.S. Treasury notes and bonds, as well as the dollar. Stablecoins are often backed by short-term U.S. Treasurys and dollar deposits.
Yet there are other Republican skeptics in the Senate that include Rand Paul of Kentucky, John Kennedy of Louisiana and Jerry Moran of Kansas. Paul has argued that the bill would add needless federal regulations.
Hawley's frustrations with the bill have only grown as the bill took shape.
His office submitted an amendment that would place limits on Big Tech's push into stablecoins. Hawley's draft amendment was used as the basis for writing a new provision requiring that publicly listed, nonfinancial companies such as Meta secure approval from a new regulatory body called the Stablecoin Certification Review Committee before it could issue stablecoins.
That provision has gained traction with other senators. But Hawley says Republican negotiators 'gutted' key parts of his amendment that would safeguard against the risks of letting tech companies issue their own digital currencies, and that he no longer supports it. 'It's essentially window dressing,' he said.
Some Democrats oppose the proposed guardrails, but for another reason: that they could benefit Musk, according to a person familiar with the discussions. These lawmakers worry that private companies including Musk's X and OpenAI would not have to undergo the more stringent regulatory vetting process.
Such companies 'could issue stablecoins with abandon, and that seems tailor-drafted for Elon Musk and his X platform,' said Hilary Allen, a professor at American University's Washington College of Law. Musk recently announced that X Money, a crypto token designed for payments on his social media platform, would enter beta testing soon. X Money did not respond to a request for comment.
(Several Republicans said that Musk wasn't a factor in drafting the bill. Lawmakers had considered sorting companies based on revenue or user count, but ultimately decided on the public-versus-private test as the cleanest way to capture such firms, according to two people with knowledge of the discussions.)
Democrats plan to introduce an amendment that would bar Big Tech companies -- publicly traded and private -- from creating their own stablecoins, according to a person with knowledge of the plan. Hawley said he would support such an amendment but was skeptical of its prospects.
There is also a potential clash with the House.
While the White House is pressuring Congress to pass the GENIUS Act, a competing House bill, the STABLE Act, calls for different regulatory requirements and a two-year moratorium on certain kinds of stablecoins. That, and the CLARITY Act, a recently proposed bill defining the broader market structure for digital assets, could complicate what shape a law would resemble.
'I've heard everything' is still on the table, said Tim Massad, a research fellow at the Kennedy School of Government at Harvard University and former chair of the U.S. Commodity Futures Trading Commission.
This article originally appeared in The New York Times.
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