Warren Calls on Treasury to Close Gaps in GENIUS Act to Protect Consumers, U.S. Financial Stability, and National Security

Warren Calls on Treasury to Close Gaps in GENIUS Act to Protect Consumers, U.S. Financial Stability, and National Security

"Experts, policymakers, and Democratic and Republican members of Congress have raised the importance of fixing flaws in the GENIUS Act as written"

Treasury "has a responsibility to quickly propose rules that will address those risks to the greatest extent possible and explain to the public the remaining gaps that must be addressed through further legislation."

Copy of Submission (PDF)

Washington, D.C. - U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Treasury Secretary Scott Bessent providing feedback on the Treasury Department's advance notice of proposed rulemaking on its plans to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).

"Experts, policymakers, and Democratic and Republican members of Congress have raised the importance of fixing flaws in the GENIUS Act as written. It is critical that Treasury take steps to implement and enforce the law in a manner that attempts to limit severe risks to U.S. financial stability, consumers, taxpayers, and national security," wrote Ranking Member Warren.

Ranking Member Warren highlighted the following areas in which the GENIUS Act poses risks to consumers and the greater economy:

• Corruption: "Given the importance of addressing this glaring problem, I expect that Treasury will propose specific steps for addressing corruption it implements the GENIUS Act, explain how it has insulated its proposed rules from conflicts of interest, and advocate for a meaningful legislative solution as Congress considers setting the rules for the broader structure of the crypto market."

• Illicit Finance: "As it implements the GENIUS Act, Treasury must propose and adopt concrete plans to shore up weaknesses that national security experts have warned will make it easier for rogue states, drug cartels, terrorists, and criminals to fund their illicit activity and move money through the financial system as stablecoins become 'the new kingpin of illicit crypto activity.'"

• Consumer Protection: "Treasury must similarly explain how federal regulators will mitigate the increased risk that consumers will get ripped off and scammed in financial transactions involving stablecoins. The GENIUS Act failed to include commonsense amendments to ensure that basic consumer protections that people enjoy when they use their Venmo app or ordinary bank account would extend to stablecoin transactions - and that the Consumer Financial Protection Bureau would maintain authority to enforce the law."

• Banking and Commerce: "The United States has long separated banking and commerce to promote competition, ensure financial stability, and prevent large conglomerates from accumulating undue power over our economy. But the GENIUS Act failed to prohibit Big Tech companies and other conglomerates from issuing their own private currencies and taking control over the money supply."

• Financial Stability: "Because the GENIUS Act itself failed to codify basic safeguards necessary to ensure that stablecoins don't blow up our entire financial system, Treasury must also propose rules to mitigate that risk to the greatest extent possible and, as Congress considers market structure legislation, advocate for concrete statutory changes that would more fully contain the chances of a meltdown that will hurt families, investors, and taxpayers across the country."

Ranking Member Warren also called for Treasury to immediately take concrete action to prohibit bailouts using the Exchange Stabilization Fund, such as the recent bailout of Argentina's financial markets: "First, the Treasury Department should publish guidance clarifying that it will not use the Exchange Stabilization Fund ("ESF"), or approve any Federal Reserve 13(3) emergency lending facility, to bail out the stablecoin industry in a period of stress. The GENIUS Act has weak financial stability and safety and soundness guardrails, making destructive runs and demands for bailouts likely."

The Ranking Member also called for immediate action to prohibit a reciprocity agreement with El Salvador that would allow Tether, the world's largest stablecoin issuer, to shirk compliance with the GENIUS Act:"Second, the Treasury Department should publicly assert that it will not execute a reciprocity agreement with the Bukele regime in El Salvador or otherwise determine that El Salvador's stablecoin supervisory and regulatory framework is 'comparable' to that of the United States."

"It is critical that Treasury implement and enforce the GENIUS Act in a manner that attempts to limit severe risks to U.S. financial stability, consumers, taxpayers, and national security. It has a responsibility to quickly propose rules that will address those risks to the greatest extent possible and explain to the public the remaining gaps that must be addressed through further legislation. Treasury has an opportunity to address some of these risks in bipartisan negotiations over legislation being considered in Congress to set the rules for the overall market structure of the crypto industry," she concluded.

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