The pace of cryptocurrency industry legislation has accelerated significantly in various governments. Some laws benefit this sector, while others harm it. A positive point is that, except for the United States, which is experiencing chaos, many countries have realized the need to legislate for the crypto industry, just like any emerging industry. Quick action allows them to harness its numerous advantages while minimizing misuse.
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However, in the U.S., the crypto industry seems to be in a legal limbo under the shadow of SEC (Securities and Exchange Commission) regulations. This organization aims to crush crypto, a goal it has never succeeded in achieving. In this article, we will examine the latest approaches by the SEC and U.S. senators’ efforts to legalize crypto usage in payments and assess how the upcoming U.S. elections might, directly and indirectly, affect this industry.
Despite the SEC’s apparent intent to dismantle the crypto industry, it’s now evident to everyone that Congress cannot keep a lid on the boiling pot of cryptocurrency forever. This means such opposition—often based on ignorance—will only be effective for a limited time. Eventually, once the U.S. government, like many other countries, establishes clear laws, the situation will change permanently.
With this in mind, we will explore some proposed congressional bills related to the use of cryptocurrencies and stablecoins in payment services and analyze which proposal is more likely to be passed and its potential impact on this sector.
Applications and Various Domains of the Crypto Industry
U.S. senators and representatives are striving to legalize payment services using stablecoins via blockchain networks to ensure ease, security, transparency, and better control over domestic and international transactions. Before diving deeper, let’s briefly review the various domains and aspects of the crypto industry, which governments must individually examine and legislate based on their perspective and conditions:
Stablecoins
Tokens and coins often backed 1:1 by fiat currencies and issued on blockchain networks. Both private entities and financial organizations can produce and distribute stablecoins.
Payment Services and Financial Transactions
High-speed and low-cost transactions on blockchain networks are among crypto’s founding goals, encouraging users and governments to adopt this potential through user-friendly platforms.
DeFi (Decentralized Finance)
DeFi seeks to provide decentralized financial services without the need for third-party intermediaries, aiming to decentralize the traditional financial system.
Trading
Trading digital currencies with fiat currencies or other cryptocurrencies takes place on centralized and decentralized platforms, encompassing Bitcoin, altcoins, NFTs, and stablecoins.
Use as Money
Cryptocurrencies, including central bank digital currencies (CBDCs), can serve as payment tools alongside national currencies.
Mining
Legalizing cryptocurrency mining (e.g., Bitcoin), regulating miners, and addressing energy consumption challenges are critical issues governments and citizens must navigate.
HODLing
Crypto assets can be stored in hot wallets (internet-connected digital wallets) and cold wallets (offline). Governments may oversee user holdings, especially in centralized hot wallets.
How Laws Are Passed in the U.S. Government
The U.S. Congress comprises two main bodies:
House of Representatives
Senate
Any proposed law or bill can be written by anyone but must be introduced to Congress by a member. A new bill can originate from either the House or Senate. Upon submission, the bill undergoes review by a subcommittee and a committee specializing in the relevant political field.
At this stage, lawmakers may invite or compel experts, lawyers, and opponents to provide testimony.
If both the subcommittee and the full committee approve the bill’s advancement, it is reported to the chamber floor for the majority party’s leadership to schedule a full vote. This stage is critical since the bill could be delayed for months or longer.
When the voting day arrives, if the majority votes in favor, the bill moves to the other chamber for a similar process.
If both the House of Representatives and the Senate approve a bill, it is sent to the president’s desk for final approval and signature. Interestingly, if the bill remains unanswered on the president’s desk for 10 days, it automatically becomes law.
This is a legally defined process, but in practice, presenting a proposal/bill from members of Congress to the president is not an easy task; there are countless obstacles along the way that can easily halt the legal process of turning a bill into law, and in some cases, significant lobbying is required.
This procedure has created a phenomenon similar to a Christmas tree; when a bill has a good chance of being approved by the House and Senate, lawmakers seek to embellish it with their own non-essential amendments that have no real impact on the overall bill, thus slowing down the entire process.
A Look at Crypto Bills in U.S. Congress and Government
One notable bill is the Bitcoin Act of 2024, introduced by Republican Senator Cynthia Lummis.
During last summer’s Bitcoin conference in Nashville, Donald Trump pledged to treat government-owned Bitcoin assets as a national strategic reserve. While he promised not to sell these assets, he made no commitment to increase them.
Following Trump’s speech, Senator Lummis proposed the Bitcoin Act of 2024, suggesting the U.S. government purchase one million Bitcoin units over five years to reduce national debt. This plan would increase U.S. Bitcoin reserves to over 1.2 million units (5.7% of the global Bitcoin supply), with a prohibition on selling any of it until federal debts are eliminated.
However, this idea seems highly ambitious, as the current U.S. debt stands at $35 trillion. For the government to repay this debt using Bitcoin, the treasury would need to own all 21 million Bitcoin units and sell each at $1.7 million—a lofty and unrealistic goal.
To date, Trump has not proposed any plans to purchase additional Bitcoin for his potential administration. However, Robert F. Kennedy Jr., a presidential candidate who withdrew in favor of Trump, suggested storing four million Bitcoin units in the national treasury.
At this point, Senator Lummis’s proposal appears to be the most reasonable.
It’s essential to remember that during elections, candidates and parties often present proposals and bills that may lack practical feasibility. Senator Lummis does not appear to be seeking her bill’s approval before the upcoming elections. Given the Republicans’ higher likelihood of winning, she likely anticipates Tim Scott, a crypto-friendly senator, to assume the Senate Banking Committee chairmanship. This scenario would improve the chances of the Bitcoin Act of 2024 reaching the president’s desk.
Stablecoins Have Better Chances Than Bitcoin
Another bill awaiting approval has been introduced by Democratic Senator Kirsten Elizabeth Rutnik Gillibrand, a member of the Senate Agriculture Committee. This bipartisan bill outlines the payment process using stablecoins and emphasizes transparency in crypto payments and transactions.
Since 2020, five bills have been introduced regarding the use of dollar-backed stablecoins for payments, but none have garnered enough votes so far. However, all these efforts have paved the way for the first approved law related to digital currencies. In fact, U.S. policymakers seem more inclined toward dollar-backed stablecoins because they support the dominance of the U.S. dollar globally, contrasting with the inherent volatility of digital currencies.
As de-dollarization of the global economy gradually becomes a certainty, stablecoins could serve as a barrier against the decline in the dollar’s value. For this reason, it seems that approving stablecoin usage for payments in Congress may face fewer hurdles than bitcoin or altcoins for payments or other applications. Additionally, the ease of purchasing stablecoins by users could significantly help offset U.S. debt. This is because any company or institution offering crypto-related services must hold reserves of physical dollars equal to the digital dollars it provides to customers, ensuring continued demand for the U.S. dollar.
Moreover, companies would be required to submit monthly transaction reports to prevent money laundering and circumventing international sanctions. As a result, the approval of stablecoins for payments and exchanges by Congress seems much more likely. However, the question remains: does this represent a positive development for prominent stablecoins?
The regulation and oversight of stablecoin transactions and services would prevent sudden crises caused by liquidity shortages or failures in the liquidity assurance algorithms of crypto projects like Luna in 2022. Similarly, projects like DAI and other altcoins offering stablecoins to users might face challenges under the proposed stablecoin legislation.
Under the bill, payments with stablecoins are defined as a crypto asset requiring an equivalent amount of physical dollars to back each cryptocurrency used in transactions. In practice, this would legalize payments using cryptocurrencies, effectively recognizing stablecoins as money or a representative of money. This is excellent news for crypto projects focused on improving payment systems. It is also a promising development for digital currencies supporting smart contracts, such as Ethereum and Solana.
The bill also specifies who can issue and use stablecoins within the framework of the law. This means all circulating stablecoins would align with the banking system, and no company could issue or circulate stablecoins without holding dollar reserves obtained exclusively from government banks.
According to the proposed bills, any financial or crypto organization offering stablecoin payment services must source its dollar reserves only from a trusted bank. Furthermore, each company’s service volume would be capped at $10 billion. Currently, Tether (USDT) has issued about $120 billion, and USDC has issued around $35 billion into blockchain networks—figures far exceeding the proposed cap for crypto institutions. Non-banking entities would also need to obtain a deposit institution charter from regulatory agencies to issue and circulate stablecoins.
What Impact Would the Stablecoin Payment Bill Have on Existing Stablecoins?
The stablecoin payment bill does not appear promising for existing stablecoin companies. For instance, the conditions are not favorable for Tether. One key clause in the bill prohibits stablecoin companies from operating outside U.S. borders, while Tether’s headquarters is located in the British Virgin Islands. Apart from geographical considerations, the bill restricts transactions and deals to amounts exceeding $100,000. This also conflicts with Tether’s structure, as many of its holders and retailers are outside the U.S. and make transactions below $100,000.
Additionally, Senator Lummis openly stated, “I personally decide who wins and who loses in this game,” implying Tether is one of their losing options.
Circle, the stablecoin service provider, might have better chances of collaborating with the U.S. government in the future because its headquarters is located within the U.S. Although Circle does not fully comply with the bill’s requirements, with a few special permits, it could pave the way for cooperation with the government if regulators decide not to obstruct it.
One peculiar and noteworthy clause in the Lummis-Gillibrand bill pertains to the potential bankruptcy of stablecoin companies. According to this clause, such bankruptcies would be covered by the Federal Deposit Insurance Corporation (FDIC). In other words, if a stablecoin service provider faces financial trouble, they would receive the same support as banks during financial crises. This clause is highly ambitious and illogical, as it introduces competition for banks, contradicting U.S. economic policies.
Lummis and Gillibrand are the only U.S. senators capable of creating such an opportunity for Circle. However, it is evident that all the commotion surrounding the legalization of crypto and stablecoin payments as substitutes for the dollar ultimately aims to centralize and censor the free nature of cryptocurrencies. Even if Tether achieves any success, both companies would be obligated to seize and freeze user assets under U.S. orders.
Lummis and Gillibrand are caught at an impasse. Whether or not transactions and crypto payment services become legal in the U.S., users will not benefit.
Without coherent regulations, the SEC will likely continue its usual harassment of this industry. Gary Gensler, Chairman of the Securities and Exchange Commission, has previously referred to stablecoins as securities.
Although Lummis and Gillibrand could exempt stablecoins from being classified as securities, the heavy shadow of the SEC and the Federal Reserve would still loom over all crypto sectors in the U.S. In other words, any proposal that minimizes the power of federal banks has virtually no chance of becoming U.S. law.
As a result, it appears that all of Lummis and Gillibrand’s efforts will be suspended until 2025. The likelihood of Joe Biden signing the 2024 Bitcoin law or the stablecoin payment bill is nearly zero.
There is a high probability that both the White House and the Senate will be controlled by Republicans next year. Even if the current bills fail, subsequent legislation more aligned with U.S. policies may become law. Thus, the inclusion of at least one crypto-related field in the U.S. legal framework would be a significant victory for this ecosystem.
However, if Democrats retain control of the White House and the Senate, all efforts of recent years risk being undone or delayed unless Kamala Harris transforms the Democrats’ relationship with crypto upon taking office. By examining this industry more thoroughly, she could help establish clear regulations, particularly for payment services in the U.S. Yet, given her lack of significant statements on the matter during her campaign, it is possible she might leave the issue to the SEC, reducing the likelihood of any crypto-related bill passing in the next four years to almost zero.
What is certain is that this issue will eventually be resolved in the U.S., but only when the advantages of officially legalizing any aspect of this industry outweigh the disadvantages for the government and central banks.
