Lawmakers and financial institutions in the United States are increasingly clashing over the role of cryptocurrency in the nation’s financial system. Two recent developments have brought these tensions to the forefront: a pushback against the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which aims to regulate stablecoins, and criticism of President Donald Trump’s proposal for a Strategic Bitcoin Reserve. While supporters argue that these initiatives could strengthen US financial influence and modernize payments, opponents warn of potential risks, including market instability, regulatory overreach, and conflicts of interest.
Democrat Lawmaker Slams Trump’s Strategic Bitcoin Reserve, Cites Conflicts of Interest
A Democratic lawmaker has called on the US Treasury to “cease all attempts” to establish a strategic cryptocurrency reserve, arguing that it would offer no tangible benefits to American taxpayers while significantly enriching President Donald Trump and his financial backers. The criticism, outlined in a March 13 letter to Treasury Secretary Scott Bessent by House Representative Gerald E. Connolly of Michigan, shows growing concerns over the Trump administration’s crypto-related initiatives.
Connolly expressed alarm over what he described as a lack of congressional oversight in the decision-making process regarding the creation of the so-called Strategic Bitcoin Reserve and Digital Asset Stockpile. The lawmaker contends that these initiatives are not only fiscally irresponsible but also politically motivated, designed to prop up certain cryptocurrencies while ignoring broader financial stability risks.
In his letter, Connolly warned that Trump’s crypto reserve would amount to a taxpayer-funded hedge for Bitcoin speculators, creating an implicit safety net for the cryptocurrency industry without offering any strategic value to the American economy.
“No strategic need has arisen that would necessitate investment in the volatile and speculative cryptocurrency market,” Connolly wrote, arguing that the move would effectively socialize risk while privatizing profit for Trump’s allies and supporters.
The lawmaker also pointed to comments from the Federal Reserve, which reportedly described the plan as “the dumbest idea ever,” reinforcing the notion that the initiative lacks economic justification.
Furthermore, Connolly criticized the way in which Trump allegedly prioritizes certain cryptocurrencies over others based on social media narratives rather than sound economic policy. He cited the administration’s inclusion of a range of cryptocurrencies—such as XRP, Solana (SOL), Cardano (ADA), and Ethereum (ETH)—in the Digital Asset Stockpile, raising concerns that the selection process is being driven by political or financial interests rather than a legitimate national strategy.
A key concern raised by Connolly is the potential conflict of interest between Trump’s political activities and his financial ties to the cryptocurrency industry. He highlighted the Trump Organization’s involvement in World Liberty Financial, a crypto platform with substantial industry influence, as well as Trump’s association with the Official Trump (TRUMP) meme coin, which has reportedly generated over $100 million in trading fees.
Connolly described the TRUMP token as a “money grab,” arguing that it represents the president’s “most lucrative get-rich scheme yet.” He also raised questions about the ethical implications of a sitting president leveraging his office to influence the value of digital assets in which he has a vested interest.
His concerns echo those of Representative Maxine Waters, a prominent Democrat on the House Financial Services Committee, who previously criticized the TRUMP meme coin, calling it an example of the “worst of crypto.” Waters also alleged that the token’s launch had elements of a ”rug pull,” where early investors exploit inflated prices before cashing out, leaving retail investors with losses.
In response to criticism, the White House has defended the cryptocurrency reserve, arguing that it will not impact taxpayers. Officials claim that the Strategic Bitcoin Reserve will be funded exclusively through budget-neutral strategies and will not require new taxpayer funding. Additionally, the Digital Asset Stockpile will be composed of cryptocurrency assets already forfeited to the government through criminal and civil cases.
Despite these assurances, Connolly remains unconvinced, stating that the administration has failed to demonstrate how these reserves serve the public interest. He also criticized the administration for not seeking congressional authorization before implementing the initiative.
Congressional Oversight Demands
In his letter, Connolly demanded transparency from the Treasury Department, requesting documents and communications related to the formation of the Bitcoin reserve. He also asked for a complete list of measures taken by the administration to prevent conflicts of interest and financial self-dealing.
Additionally, Connolly sought a list of companies in which the Treasury holds crypto-related financial interests, questioning whether administration officials, including figures like Elon Musk, had disclosed their financial ties to the industry.
“Has the Presidential Working Group on Digital Asset Markets, on which you serve, which has been tasked with developing a federal regulatory framework to govern the cryptocurrency reserve, reviewed financial disclosures by administration officials, including but not limited to Elon Musk?” Connolly inquired.
US Bankers and Senators Push Back Against the GENIUS Stablecoin Act, Citing Threat to Traditional Banking
In related news, a growing battle is unfolding in the US Senate as traditional bankers and their political allies push back against the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, fearing that stablecoins could disintermediate the banking sector and erode their long-standing market dominance.
Introduced by Senator Bill Hagerty on Feb. 4, the GENIUS Act aims to establish a comprehensive regulatory framework for tokenized US dollars, providing clarity for stablecoin issuers and expanding their role in the financial system. However, the bill faces significant resistance from lawmakers aligned with the banking sector, particularly from Senator Elizabeth Warren, who has proposed amendments to prevent big tech firms from issuing their own stablecoins.
As digital assets continue to disrupt traditional finance with near-instant settlement times and significantly lower transaction costs, the conflict over stablecoin regulation sheds light on a larger debate about the future of money in the United States.
According to a report from American Banker, the GENIUS Act requires 60 votes to pass in the Senate, meaning that at least seven Democrats would have to break ranks and vote with Republicans to push the legislation forward. Given the current political climate, this could prove to be a challenging hurdle.
One of the bill’s most vocal critics is Senator Elizabeth Warren, who has consistently opposed cryptocurrency adoption. Warren argues that allowing big tech companies and commercial conglomerates to issue their own stablecoins would undermine the financial system and threaten consumer protections.
Her opposition reflects broader concerns among banking executives, who fear that stablecoins could lead to bank disintermediation, reducing their control over the payment ecosystem and limiting their ability to profit from financial services.
Stablecoins—digital tokens pegged to a fiat currency like the US dollar—have emerged as a formidable alternative to traditional banking due to their ability to process transactions almost instantly and at a fraction of the cost of legacy financial systems.
By eliminating the need for intermediary banks, stablecoins facilitate cheaper cross-border payments and enhance financial inclusion, particularly in developing economies where access to traditional banking remains limited.
Critics of the GENIUS Act, particularly big banks, view the potential rise of stablecoins as an existential threat. If more consumers and businesses adopt stablecoins for payments, banks stand to lose a significant share of transaction fees, remittance revenue, and interest income from funds traditionally held in checking and savings accounts.
Bank of America CEO Brian Moynihan acknowledged these concerns but signaled that banks may eventually enter the stablecoin space themselves.
Such a move would mirror efforts by rival institutions, including JPMorgan Chase, which has already launched its own digital asset, JPM Coin, for institutional transactions.
Stablecoins and US Dollar Dominance
Despite the pushback from traditional financial institutions, Federal Reserve Bank Governor Christopher Waller has defended stablecoins, stating that non-banks should be allowed to issue them. Waller believes that stablecoins could expand payment use cases, particularly in the developing world, by offering lower-cost, faster transactions.
The US government is also recognizing the strategic benefits of stablecoins. Speaking at the White House Crypto Summit on March 7, Treasury Secretary Scott Bessent stated that stablecoins could be instrumental in maintaining US dollar dominance globally.
This argument suggests that stablecoins could actually strengthen the US financial system by increasing demand for US Treasuries and reinforcing the dollar’s influence in global markets.
As the battle over the GENIUS Act continues, the future of stablecoin regulation in the US remains uncertain. While the bill has support from Republican lawmakers and the crypto industry, opposition from key Democrats like Elizabeth Warren and resistance from banking lobbyists could stall its progress.
This article was originally Posted on Coinpaper.com
