US passes first major national crypto legislation

Lawmakers in the US have passed the country's first major national cryptocurrency legislation.

It is a major milestone for the once fringe industry, which has been lobbying Congress over regulation for years and poured millions into last year's election, backing candidates that included Donald Trump.

The bill sets up a regulatory regime for so-called stablecoins, a kind of cryptocurrency backed by assets seen as reliable, such as the dollar.

Trump is expected to sign the legislation into law on Friday, after the House passed the bill on Thursday, joining the Senate, which had approved the measure last month.

Known as the Genius Act, the bill is one of three pieces of cryptocurrency legislation advancing in Washington that is backed by Trump.

The president once derided crypto as a scam but his opinion shifted as he won backing from the sector and got involved in the industry as a businessman, with ties to firms such as World Liberty Financial.

Supporters of the legislation say it is aimed at providing clear rules for a growing industry, ensuring the US keeps pace with advances in payment systems. The crypto industry had been pushing for such measures in hopes it could spur more people to use digital currency and bring it more into the mainstream.

The provisions include requiring stablecoins, an alternate cryptocurrency to the likes of Bitcoin, to be backed one-for-one with US dollars, or other low-risk assets. Stablecoins are used by traders to move funds between different crypto tokens.

The use of these coins, which are viewed as less volatile, has grown rapidly in recent years.

• From Bitcoin to XRP: Key cryptocurrency terms and what they mean

Critics argue the bill will introduce new risks into the financial system, by legitimising stablecoins without erecting sufficient protections for consumers.

For example, they said it would deepen tech firms' participation in bank-like activities without subjecting them to similar oversight, and leave customers hanging in a convoluted bankruptcy process in the event that a stablecoin firm should fail.

They had also tried to rally opposition to the bill by arguing that voting in favour was effectively condoning Trump's business activities - including his family's promotion of their own crypto coins.

But it nevertheless drew significant support from Democrats, about half of which supported the bill, as well as the majority of Republicans.

"Some members may believe passage of this bill, even with flaws, is better than the status quo. We believe this is a fundamental misunderstanding of the risks involved with these instruments," a coalition of consumer and advocacy groups wrote in a letter to Congress this spring.

They warned that passage would "allow the proliferation of assets that consumers will wrongly perceive as safe".

Analysts had expected Congress to pass all three bills earlier this week, but unexpected hiccups led to delays.

The two other bills have passed the House and are headed to the Senate, where Republicans hold a narrow majority. Those bills would prevent the US central bank from establishing a digital currency and set up a regulatory framework for other forms of crypto.

The advance comes as Trump is reportedly working on an presidential order that could allow retirement accounts to be invested in private assets, such as crypto, gold and private equity.

The value of Bitcoin hit a new record this week, passing $120,000 (£89,000).

But Terry Haines of Washington-based analysis firm Pangaea Policy, said he did not expect the other two bills, which are more significant, to go further.

"This is the end of crypto's wins for quite a while - and the only one," he wrote. "When the easy part, stablecoin, takes ~4 to 5 years and barely survives industry scandals, it's not much to crow about."