It’s official. As my colleague David Dayen and I predicted it, enough Democratic senators voted for a cryptographic “regulation” bill (called the Genius Act), mainly written by the industry and the servants of Donald Trump, which he easily adopted on Monday. If anything, it was even worse than what I expected – only nine democrats were needed to reach the 60 votes required, but 16 voted for it. (Two Republicans, Sens. Rand Paul de Kentucky and Jerry Moran from Kansas, voted against.)
This vote was technically for the Clot, which means that the bill could not be interrupted by an obstacle, but it was the only vote that counted. The official vote, now scheduled for Thursday, is only a formality, and I expect many of these senators to vote against this so that they can claim that they are not monumentally corrupt.
The Sixteen Crypto is as follows: Kirsten Gillibrand (D-NY), who co-pacarinated the bill, Adam Schiff (D-CA), Angela Alsobrooks (D-MD), Mark Warner (D-VA) Luján (D-NM), Elissa Slotkin (D-Mi), Maggie Hassan (D-Nh), Martin Heinrich (D-NM) Jon Ossoff (D-GA), Alex Padilla (D-CA), Jacky Rosen (D-NV) and Lisa Blunt Rochester (d-de). Each of them should be primitive during their next elections.
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Senator Elizabeth Warren (D-MA), who has more experience in financial regulations than anyone in Congress, stressed the problems in a speech on the Senate soil. First, the bill gives a clear green light to the world’s historic corruption of Trump. “The adoption of this bill means that we can expect more anonymous buyers, large companies and foreign governments to use the stablecoin of the president both as a dark bank account protected from government surveillance and as a means of personally repaying the president. For crooks, that is a two for one,” she said.
Second, it would considerably destabilize the financial system by allowing the stables of crypto (that is to say cryptographic assets supposed to be fixed to the dollar and supported with real assets) without actual regulations or protection. As Warren points out, we have seen in the past, with the financial derivatives which led to the 2008 accident, that a low regulatory bill is worse than at all. The powers of the various regulatory authorities are not clarified at all, and in any case, with Trump tearing these agencies in tatters, that would not matter if they were. Another crypto accident will come, but this time it could shoot Wall Street with.
Third, this would greatly allow criminal activity of all kinds. Stablecoins are already the currency of choice for everyone, from human traffickers to drugs from drugs to terrorists, and the bill would increase the size of the stablescoin market by ten times. Incredibly, a new language inserted only last weekend allows Stablecoins which do not respect the American legal rules to circulate at the national level. One wonders if “El Chapo” Guzman was involved in writing this delicious arrangement.
Fourth, this would allow companies to issue their own stablecoins – effectively their own private money, like centuries ago. “Community banks have warned us that by creating a parallel and slightly regulated banking system, the stable market will receive the deposits of our local communities. There will be fewer funds available for small businesses and households across our country, ”said Warren.
The cryptography industry has managed to avoid a complete implosion, dusted and approached Congress with a massive bag in cash.
A more technical problem not mentioned by Warren is how a potential bankruptcy of stablecoin would be treated. As explained by Georgetown’s law professor, Adam Levitin, the Act respecting the engineering would give priority to the allegations of stablecoin investors in priority in the bankruptcy court. This creates many problems: for example, you cannot perform an ordered bankruptcy without first paying law professionals to sort everything, which seems to be excluded. Even at the beginning, any bankruptcy of Stablecoin – which is very likely if you look at the incredibly precarious assessments of these things – will be a disaster.
Worse still, suppose that a normal bank which contains a bunch of stablecoin reserve assets increases. In this case, Lévitin writes: “The claims of the investors of Stablecoin will become before the bank depositors.” Ordinary people will have their deposits protected through the FDIC insurance fund, but this insurance, funded indirectly by depositors, will first pay Stablecoin investors. “In other words, the law on engineering is subsidizing the emission of stable at the rear of bank deposits.”
This whole story echoes a story of financial crises, this time played at the speed of the chain. It is a familiar scheme in the history of capitalism: a speculative boom takes place, the values of assets go up beyond any type of rational basis, many people get richer on paper, then finally the music stops. Everyone tries to sell their assets both in panic, leading to a market accident and a recession. Many companies and individuals are ruined, investors become very hesitant and careful, and often new financial regulations are imposed to prevent a recurrence.
But then, memories fade, new people enter the market without any panic experience, new financial products are created to escape regulations, and financial companies are starting to put pressure on the government to completely repeal them. Sooner or later, another frantic boom begins, leading to another crash.
Usually it takes at least a decade or two. Twenty years have passed between the panics of 1837 and 1857, and it was 16 years until the next. After the Great Depression, we obtained the strictest and most effective financial regulations in history within the framework of the New Deal, which prevented still minor panics in the late 1980s. Even if the controls were eroded and reduced under each president of Reagan to Bush II, the surviving regulatory pieces prevented a large -scale accident until 2008.
The crypto, on the other hand, has undergone a full -fledged merger Not even three years ago. The value of all the main parts was in free fall, several Stablecoins fell from their ankle, and several large investment and cryptography negotiation companies have turned out to be criminal plots and went bankrupt, including FTX. This company went from the purchase of ads from the Super Bowl featuring Larry David in Dead as a stone, and its CEO was accused of (and later found guilty) of theft of billions of dollars, in less than a year. The replacement CEO appointed to manage bankruptcy was the same guy who had managed the bankruptcy of Enron. In a legal file, he wrote: “During my career, I have not seen such a complete failure of business controls and such a complete absence of trustworthy financial information here.”
The case of FTX is not out of the ordinary. Crime and scams are and have always been absolutely crawling in cryptographic space. Barely a day passes without a shady influencer who makes a carpet shooting scam immediately. And it makes sense – Crypto is completely useless for any legitimate business. The dollar payment and loan system is much cheaper and easier to access, and more importantly, the railings were built during the decades to protect against criminals.
However, the industry managed to avoid a complete implosion, dusted and went to the congress with a massive bag in cash. He was the biggest corporate expenditure during the 2024 campaign, representing almost half of the total – in terms, almost none of his announcements mentioned Crypto. An crypto silver ocean helped Adam Schiff to win a primary against Katie Porter, also helping to eliminate Sherrod Brown senator in Ohio. Having bought the “over -the -counter as many cheese books” congress, the new employees (senatorial) of crypto do as they are told. People who are easily corrupted by such a scandalously toxic industry do not have their place in democratic politics, much less small-D, political.
