Democratic Lawmakers Withdraw Support for Crypto Legislation over Corruption Concerns in Trump's WLFI

The Shift in Support for Cryptocurrency Legislation Among Democratic Lawmakers

In recent developments, Democratic lawmakers in Washington have shown waning support for legislation on cryptocurrency. This shift is influenced by growing concerns over corruption allegations that encompass the activities of World Liberty Financial (WLFI), a company primarily linked to the Trump family.

The GENIUS Act and The Back-and-Forth of Support

In March, the GENIUS Act initiated plans for the regulation of stablecoins in the United States. This bill garnered much backing during a critical committee reading from a number of pro-cryptocurrency Democrat lawmakers. Some of these supporters included Democratic Senators Ruben Gallego, Mark Warner, Lisa Blunt Rochester, Andy Kim, and Angela Alsobrooks. They were however, in direct opposition to the prominent Democratic Senator Elizabeth Warren, who is an outspoken critic of cryptocurrency. The bill managed to get past the committee stage only after incorporating significant changes. These changes included stricter requirements for stablecoin issuers together with provisions for Anti-Money Laundering (AML), countering terrorism financing, and procedures for risk management.

Heightened Democratic Concerns over the Legislation

Even with these changes, it appears that the bill still has not done enough to assuage the concerns of the Democratic lawmakers. Several high-profile cryptocurrency deals, which have brought substantial personal gain to President Donald Trump, have caused the Democrats to progressively withdraw their support. Among the five Democrats who had initially supported the GENIUS Act in the Senate Banking Committee, four have made a joint statement expressing their discomfort with the direction that the stablecoin legislation is taking. They assert that the bill currently does not address several issues and needs to incorporate stronger provisions on anti-money laundering, foreign issuers, national security, and accountability among others.

Concerns Over Trump’s Cryptocurrency Projects

Democratic Representative Maxine Waters has been vocal in her criticism of Trump’s dealings with cryptocurrencies, mainly through his investment in WLFI and his memecoin, TRUMP. She has also expressed deep concerns about the WLFI USD1 stablecoin project. Republican Representative French Hill is leading the initiative for a draft bill that would alter how US financial regulators, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), handle cryptocurrencies. However, even Hill acknowledges that the crypto projects linked to Trump complicate the potential passing of legislation.

The Trump Family and World Liberty Financial

World Liberty Financial, which is tied significantly to the Trump family, has already gained around $550 million from sales of Trump tokens. The company continues to close more deals that substantially benefit the founders and board members, a number of which are Trump family members. One notable deal involves Eric Trump, who made an announcement that the Abu Dhabi-based investment firm MGX would use USD1 to finalize a $2-billion investment in the global crypto exchange, Binance.

Impact of Politics on the Passage of the Crypto Bill

Despite these seemingly insurmountable issues and concerns, some political observers suggest that the hesitation from Democrats could be an act of political strategy, rather than a genuine concern over the potential issues arising from the cryptocurrency industry. A political action committee, Protect Progress, that strongly supports crypto, donated millions to Gallego’s campaign. Lawyer and cryptocurrency regulation specialist Aaron Brogan has noted that this could indicate that the committee’s major donors would prefer to replace the current bill with something that suits their preferences better.

The Future of Bipartisan Cooperation on Cryptocurrency

With all these controversies and mounting pressure on Democratic officials to counteract Republican efforts, the possibility of a bipartisan stablecoin bill, or a framework for cryptocurrency, looks increasingly unlikely.