(Reuters) -Legislation that would create a regulatory framework for U.S. dollar-pegged cryptocurrency tokens known as stablecoins faced a setback on Thursday as the bill failed to clear a key hurdle in the U.S. Senate.

The setback is a blow to the crypto industry, which has long pushed for lawmakers to pass legislation creating new rules for digital assets. The sector spent more than $119 million backing pro-crypto congressional candidates in last year's elections and had tried to paint the issue as bipartisan.

Stablecoins, a type of cryptocurrency designed to maintain a constant value, usually a 1:1 dollar peg, are commonly used by crypto traders to move funds between tokens.

Their use has grown rapidly in recent years, and proponents say that they could be used to send payments instantly. Analysts and lobbyists had once considered stablecoin legislation almost certain to pass this year, but the bill - dubbed the GENIUS Act in the Senate - has faced pushback from Democrats as frustration has grown over President Donald Trump's various crypto ventures.

In a vote on Thursday, only 49 senators voted to advance the bill to a full vote, falling short of the 60 votes needed to formally end debate on the bill. Notably, two Republican senators - Senator Josh Hawley and Senator Rand Paul - voted alongside Democrats against moving forward with the bill.

"While we've made meaningful progress on the GENIUS Act, the work is not yet complete, and I simply cannot in good conscience ask my colleagues to vote for this legislation when the text isn't finished," said Senator Mark Warner, a Democrat who earlier voted to advance the bill out of the Senate Banking Committee, in a statement.

A group of Democrats, including Warner, that initially supported the legislation said on Saturday that Republicans had failed to negotiate on stronger provisions related to foreign stablecoin issues and anti-money-laundering protections.

Senate Democrats more broadly have expressed concerns about the bill especially after Trump's crypto business World Liberty Financial announced last week that its stablecoin would be used by an Abu Dhabi investment firm for its $2 billion investment in crypto exchange Binance.

In a speech on the Senate floor after the vote to move the bill toward a full vote failed, Senate Majority Leader John Thune expressed disappointment with Democrats, accusing them of denying the White House a bipartisan win.

"Not every bill that comes to the floor is a final bill," Thune said.