Stablecoin standoff: Senate Democrats withdraw support, jeopardizing crypto bill’s path

A group of nine Senate Democrats who previously backed crypto-friendly legislation are now threatening to derail a landmark stablecoin bill, signaling deepening divisions over how the fast-growing digital asset sector should be regulated.

In a surprise Saturday statement first reported by Politico, the senators declared they would not support the GOP-led bill “in its current form” if it reaches the Senate floor, citing a range of unresolved concerns.

Their demands for changes focus on several key areas: safeguards to prevent illicit financial flows, stricter rules on overseas stablecoin providers, national security, stronger guarantees that stablecoins won’t undermine the safety and soundness of the existing financial infrastructure, and tougher penalties on noncompliant actors.

The move comes just days before the chamber is expected to hold a procedural vote on the legislation, which aims to create the first federal framework for stablecoin issuers — digital tokens typically pegged to the U.S. dollar or other assets.

Who signed? Who blocked?

The Democratic bloc, which includes Sens. Ruben Gallego (Ariz.), Mark Warner (Va.), Lisa Blunt Rochester (Del.), and Andy Kim (N.J.) — all of whom previously voted in favor of the bill when it passed the Senate Banking Committee in March — now say the legislation still “has numerous issues that must be addressed.”

The letter, also signed by Sens. Raphael Warnock (Ga.), Catherine Cortez Masto (Nev.), Ben Ray Luján (N.M.), John Hickenlooper (Colo.), and Adam Schiff (Calif.), emphasized a continued willingness to negotiate. “We are eager to continue working with our colleagues to address these issues,” the senators wrote. “As stablecoins continue to grow in popularity, it is critical for Congress to work in a bipartisan fashion to create a regulatory framework that sets forth clear rules of the road.”

Notably absent from the statement were the bill’s two Democratic co-sponsors: Sen. Kirsten Gillibrand (N.Y.) and Sen. Angela Alsobrooks (Md.).

GOPeeved

The bill’s lead sponsor, Sen. Bill Hagerty (R-Tenn.), responded to the pushback with a warning and a challenge.

“We have a choice here. Move forward and make any remaining changes needed in a bipartisan way, or show that digital asset and crypto legislation remains a solely Republican issue,” he said, stressing the need to solidify U.S. dominance in the digital asset space.

The defection adds a new layer of complexity to an already contentious process, especially as the Trump family’s growing involvement in the digital asset space — including plans for a new stablecoin venture — has injected fresh political sensitivities into the debate.

With the bill now hanging in the balance, Democrats may hold the leverage to reshape key provisions — or stall one of the crypto industry’s most significant regulatory breakthroughs to date.