GENIUS Act critics warn it can have implications as chaotic as the 2008 financial crisis

Sen. Elizabeth Warren criticized the bipartisan GENIUS Act, saying that vested interests from the crypto industry heavily dictated this legislation. This situation reminds her of the 2000 Commodity Futures Modernization Act, which was a precursor to the 2008 financial crisis. Can the GENIUS Act end up being as disastrous as the CFMA?

What did Warren say exactly?

A ranking member of the Senate Banking Committee, Senator Warren, outlined her criticisms of the GENIUS Act that recently became the law in an interview with Vanity Fair released on Jul. 24, 2025. She boldly began by saying she is worried about the state of the republic. 

Warren has several issues with the newly adopted law and the overall state of crypto regulation in the U.S.:

• First off, she is concerned with Trump’s unlimited opportunities for self-enrichment, which he uses, not shying away from benefiting from his presidential position.
• Secondly, Warren emphasizes that the law was heavily influenced by the industry actors who coined the bill in a way that places their interests above the well-being of the rest of Americans.
• Thirdly, Warren sees that the act bears inherent risks similar to those that paved the way to the 2008 financial crisis. Warren condemns irresponsible deregulation that favors an industry but doesn’t protect the citizens.

Addressing the launch of memecoins and stablecoin by the companies affiliated with the Trump family, Warren claimed Trump “is using the presidency to enrich himself through crypto, and he’s doing it in plain sight.” In June, Forbes estimated Donald Trump’s earnings from cryptocurrency projects at $1 billion, a figure beating returns from all his other ventures. 

Crypto ventures associated with the Trump family include memecoins Official Trump and Melania, multi-faceted crypto company World Liberty Finance, a stablecoin USD1 released by this company, mining company American Bitcoin, and Bitcoin treasury launched by Trump Media and Technology Group, a company owning Trump’s media platform Truth Social.

A large section of the interview was dedicated to Trump’s efforts to silence his critics in American media–a topic one rarely sees in the Crypto X, despite the community’s alleged dedication to censorship resistance.  

As for the involvement of crypto industry insiders in the policy-making, Warren noted that Trump disbanded the Department of Justice’s cryptocurrency enforcement unit, thus reducing independent supervision of the president’s actions. Warren said:

“Donald Trump is the first president in American history to sign into law legislation to put himself in charge of the regulators who will determine the value of a large part of Donald Trump’s own wealth.”

Speaking about the GENIUS Act contents, Warren said that America already had the case when “the industry has written its own legislation.” The example Warren is talking about is the 2000 Commodity Futures Modernization Act, “handed” by the derivatives industry to Washington to make it the law, which it did.

“The consequence was the crash of 2008 that cost 10 million American families their homes and more their jobs and their savings. When Washington works for industries like this, a handful of people get really rich, and the American people pay the price.”

While the comparison made by Warren is concerning, as CFMA contributed significantly to the 2008 financial crisis and Great Recession, she didn’t elaborate on how exactly the GENIUS Act is meant to harm Americans.

Why do Warren and others compare the GENIUS Act and the Commodity Futures Modernization Act?

Comparing these two acts is not easy, as they deal with two different markets and their flaws have a different nature. It will take much time to see if the dangers attributed to the GENIUS Act are real.

The CFMA, signed by then-President Bill Clinton in December 2000, was aimed at setting the framework to oversee the OTC derivatives trading. However, the bill turned out to be too loose. It deregulated the market in a bad way, opening doors for chaos that eventually led to the Great Recession.

The GENIUS Act, however, addresses risks through requirements of regular audits of the companies issuing stablecoins and high amounts of collateral. The standard is so high that the biggest USD-pegged stablecoin issuer, Tether, had to increase its reserves in order to fit in the new regulation. On top of risk management, the demand for USD-pegged stablecoins around the world may enhance the economic health of the U.S.

Then, why do Warren and other GENIUS Act critics compare the stablecoin regulation with the chaos created by the uncontrolled issuance and trading of complex derivatives? They assume that the friendly regulatory climate will lead to the issuance of various stablecoins–each big tech company will release its own private dollar, causing confusion, interoperability problems, and risks associated with the hypothetical loss of value of some of these stablecoins. 

This image of the future is not impossible; many tech companies are already working on the branded stablecoins. As the professor of economics, Barry Eichengreen pointed out in his essay “Genius Act Will U.S. to Economic Chaos,” he noted that the bill is not about embracing the future of money but rather dragging the U.S. to the 19th century pre-Civil War realm of Free Banking Era, when banks were issuing their own currencies, causing much confusion.

He wrote:

“[The GENIUS Act will] give crypto a patina of governmental authority and legitimacy. The Genius Act would give hundreds — perhaps even thousands — of American companies the ability to issue their own currencies. Imagine Walmart issuing a Walmartcoin, and Amazon doing the same with an Amazoncoin, enabling them to bypass the banking system and credit card networks.”

The GENIUS Act protects the owners of stablecoins by giving them priority in receiving the underlying assets as compensation in cases of trouble with the stablecoin issuer. The problem is that in the event of the crash of a huge stablecoin issuer, it will have to sell the U.S. Treasury bills quickly to pay the crypto holders. Such a sped-up sale may undermine the U.S. economy and the dollar value that otherwise is seen as benefiting from the global expansion of stablecoins.

Another similarity pointed out by another GENIUS Act critic, Mark Hays, who is working as a director of crypto and fintech at Americans for Financial Reform, is the poor risk management. According to Hays, the GENIUS Act offers half-measures while not addressing various dangers, just like it was in the case of the CFMA.  

Where one bill (the CFMA) favored banks in their striving to trade sophisticated derivative assets, the GENIUS Act lacks restrictions for the top officials. Interestingly, it prohibits Congress members and senior executives from issuing stablecoins during their terms, but it doesn’t block Presidents and Vice Presidents from issuing stablecoins, as ethics laws don’t apply to them.

The Chief Analyst at MEXC Research, Shawn Young, comments on crypto.news: 

“Senator Warren managed to raise an important historical parallel, but the comparison between the GENIUS Act and the Commodity Futures Modernization Act (CFMA) of 2000 isn’t entirely accurate. 

With the CFMA deregulating over-the-counter derivatives like credit default swaps, they became key contributors to systemic risk in the 2008 financial crisis. The GENIUS Act, in contrast, attempts to do the opposite for crypto markets by providing clearer regulatory pathways and reducing ambiguity, especially around the classification of digital assets.

That said, Senator Warren’s underlying concern is still valid. Rushed or industry-driven legislation without proper oversight indeed can create long-term vulnerabilities. This also rings true about the GENIUS Act, as its absence of guardrails for anti-corruption clauses is striking. Excluding those provisions leads to a lack of transparency and invites skepticism about who the bill truly serves.

All in all, effective crypto legislation should strike a balance: protecting investors while enabling growth and upholding market integrity. The GENIUS Act makes progress on the growth front, but we are behind Warren in terms of how it falls short on investor protection. That’s a gap lawmakers need to address if they want to build public trust in the regulatory process.”

While Warren and some other fellow Democrats are condemning crypto as too risky and associate it with crime, many of the huge incidents that did much harm (for instance, the FTX collapse) took place during Joe Biden’s tenure and the harsh supervision of the SEC, headed by the crypto skeptic Gary Gensler. It signals that risks exist, no matter how strict or loose the approach of legislators is. The balance mentioned by Shawn Young is what is important, and we are yet to see if the GENIUS Act achieves it.