(Reuters) -Top crypto stocks on Wall Street surged on Wednesday after the U.S. Senate approved a milestone stablecoin bill, fueling hopes for broader adoption of what was once a niche corner of the crypto sector.

The bill was passed with bipartisan support, marking a turning point in the debate over crypto oversight, and a breakthrough for a sector long stuck in regulatory limbo.

The tokens have gained traction for offering crypto's convenience without its volatility. Pegged to currencies like the U.S. dollar, they aim to hold a stable value backed by reserves.

Stablecoin issuer Circle's shares were last up 20%. Crypto exchange Coinbase rose 14%, while commission-free brokerage Robinhood, which offers crypto trading, gained 3.4%.

The Republican-controlled House of Representatives must pass its version of the bill, known as the GENIUS Act, before it heads to President Donald Trump for approval.

"Once passed into a law (likely by the end of summer), we expect stablecoins to evolve from the money rail of crypto to the money rail of the internet," analysts at brokerage Bernstein said.

Circle, the issuer of the second-largest stablecoin by market value, went public earlier this month in a blowout debut on the New York Stock Exchange. Its shares were last at $173.60, versus IPO price of $31.

The company's flagship USDC stablecoin has a market value of around $61.4 billion, according to data from CoinGecko.

The stablecoin legislation is one of two major crypto bills that industry supporters hope to have signed into law this year, analysts at Barclays said.

GAINING MOMENTUM

Proponents say by setting clearer rules for issuing and managing dollar-pegged tokens, the bill could bring greater legitimacy to the sector. Several high-profile corporates are also reportedly exploring launching their own stablecoins.

"History is being made," Circle CEO Jeremy Allaire said in a post on social media platform X, adding that he expects the legislation will "drive U.S. economic and national competitiveness for decades to come."

Stablecoins account for roughly $256 billion of the crypto sector's total $3.3 trillion market value, according to CoinMarketCap data.

"While stablecoin demand is already impressive, the new bill advancing through Congress can accelerate that demand," said Andrew Rocco, stock strategist at Zacks Investment Research.

"The bill would finally put a regulatory framework around issuing and operating stablecoins, lending credibility to the industry."

If signed into law, stablecoins will have to be backed by liquid assets - such as U.S. dollars and short-term Treasury bills - and for issuers to publicly disclose the composition of their reserves on a monthly basis.

"Stablecoin adoption could also serve as a strong tailwind for major cryptocurrencies like bitcoin," analysts at brokerage KBW said.