An Elon Musk stablecoin? Democrats warn of a Big Tech crypto takeover.

Welcome back to Distributed Ledger — your one-stop-shop for all things crypto. I’m Chris Matthews, a reporter in MarketWatch’s D.C. bureau, where I cover the intersection of public policy and markets.

Crypto investors rejoiced at the election of Donald Trump, sending tokens like bitcoin BTCUSD and ether ETHUSD surging as the industry looked forward to a lighter-touch regulatory regime and even direct support for the market in the form of a U.S. strategic crypto reserve .

But bitcoin has since given back most of those gains amid a broader market downturn related to President Donald Trump’s trade policy, while the administration’s establishment of a bitcoin reserve was a bit of a letdown as taxpayer funds won’t be used to support the token’s price.

That has left the industry looking to Congress as the next great catalyst for momentum.

Stable geniuses

The Senate is set to vote Thursday on the GENIUS Act — a sweeping stablecoin bill that both critics and supporters say would put the imprimatur of the federal government on the nascent industry, and clear the way for greater adoption of stablecoins as a means of payment outside the world of crypto trading.

Introduced by Republican Sen. Bill Hagerty of Tennessee and co-sponsored by Democratic Sen. Kirsten Gillibrand of New York, the bill would create a dual regulatory framework for stablecoin issuers, allowing companies to register with either state or federal authorities.

Stablecoins are a type of cryptocurrency that peg their value to government-backed currencies like the U.S. dollar DXY. They are now largely used to facilitate trading in cryptocurrencies, but the industry sees the potential for them to serve as a means of payment for consumers and businesses alike.

Democratic Sen. Elizabeth Warren of Massachusetts, a noted crypto skeptic, is hoping to rally Senate Democrats against the measure, warning that it will open the door to a Big Tech takeover of the dollar.

“Under this bill, Elon Musk could roll out ‘X Money’ tomorrow, turning social media into a payments empire with little oversight,” Warren said in a two-page analysis of the bill circulated to her Democratic colleagues and shared with MarketWatch. “We’re looking at the potential privatization of the dollar.”

Gillibrand has argued that these fears are exaggerated and that the law is “critical to maintaining U.S. dollar dominance, promoting responsible innovation and protecting consumers.”

Under the proposed framework, stablecoin issuers wouldn’t be subject to the same federal consumer-finance safeguards that govern credit cards and peer-to-peer payment platforms. Critics warn that in the event of an issuer collapse, consumers could face frozen funds, lengthy bankruptcy proceedings or outright losses.

The bill’s backers argue that requiring issuers to hold one-to-one reserves would prevent such disasters and provide a more secure foundation for stablecoin transactions.

“It’s important to understand that stablecoins are not banking. The focus of stablecoin regulation should be that they’re used for payments, and we don’t historically regulate payments companies like banks,” said Jai Massari, chief legal officer at Lightspark, a company that offer payment services on the Bitcoin Lightning Network.

“A wholesale ban on stablecoins being issued by certain kinds of companies just limits competition before we’ve even really seen the potential innovative use cases for stablecoins,” she added.

The law’s potential impact on financial stability is another flashpoint. While it prohibits stablecoin issuers from holding highly volatile assets, it does permit investments in money-market funds, repurchase agreements and uninsured bank deposits — assets that have been bailed out by the government in past financial crises.

Adam Levitin, bankruptcy-law expert at Georgetown University, cited the example of the 2023 Silicon Valley Bank bailout as an example of how the fear of financial contagion can force policymakers into expensive and unpopular support for industry.

“By creating a regulatory regime for stablecoins, the federal government will ‘own’ any problem that arises in the market,” Levitin wrote in a recent blog post . “It sets up a situation where the government has to deliver safety otherwise, on its own dime. In other words, it sets up a bailout.”

SEC to wait on new crypto ETFs

The Securities and Exchange Commission has delayed decisions on whether to approve filings for exchange-traded funds backed by several altcoins — including XRP XRPUSD, solana SOLUSD , litecoin LTCUSD and dogecoin DOGEUSD — as well as a new ether ETF proposal allowing an issuer to stake its holdings and pass some of those earnings on to investors.

Analysts say that these decisions will be delayed at least until SEC Chairman-designate Paul Atkins is confirmed by the Senate and takes the reins at the regulator.

Bloomberg Intelligence ETF analyst James Seyffart pegged the chances of a litecoin ETF getting approved at 90%, a solana fund at 70%, a dogecoin fund at 75% and an XRP ETF at 65%.

Seyffart said on X Tuesday that these delays are “standard procedure” and that the final deadlines for approval aren’t until October. “This doesn’t change our relatively high odds of approval,” he wrote.

Crypto snapshot

Bitcoin is down nearly 8% over the past week amid a broader market downturn, though the world’s most popular crypto has held up better than other digital assets.

Ether has shed more than 14% over the last seven days, while solana declined 12.3%, cardano ADAUSD tumbled 24.5% and dogecoin lost 17.4%.