New York’s district attorneys have raised alarms over the GENIUS Act, a federal law aimed at regulating stablecoins, suggesting it might inadvertently diminish the motivations for stablecoin issuers to align with law enforcement efforts, risking exploitation by criminals.
According to a report by CNN, Attorney General Letitia James and four district attorneys have expressed their concerns in a letter, arguing the GENIUS Act could potentially shield stablecoin providers from scrutiny related to fraudulent activities.
The letter specifically highlights issuers like Tether and Circle, accusing them of benefiting from illicit activities within stablecoin markets, with particular scrutiny directed towards Tether for their approach to handling suspicious transactions in USDT. They stated:
“The reality for many victims is that funds stolen in or converted to USDT will never be frozen, seized, or returned.”
The troubling aspect of Circle is also noted in the letter, asserting that while it claims to support anti-fraud initiatives, its practices for fraud victims are allegedly far inferior compared to Tether’s.
Dante Disparte, Circle’s Chief Strategy Officer, stated that the GENIUS Act ensures that stablecoin issuers comply with financial integrity expectations while advancing consumer safeguards:
“[The GENIUS Act] makes clear that stablecoin issuers must abide by applicable financial integrity rules for combating illicit activity, while enhancing clear consumer protection norms.”
On the other hand, Tether asserts they take fraud seriously, refusing to bow to demands from state-level legal requests akin to regulated financial entities, citing their headquarters are based in El Salvador.
This act, signed by Donald Trump in July, aims to lay down regulatory frameworks for stablecoins, necessitating implementation within 18 months post-enactment or 120 days once associated regulations are established.
Potential Challenge for NY AG in 2026
Letitia James, currently not indicating any withdrawal from her re-election as New York Attorney General, may face a competitor mirroring crypto industry interests in 2026, specifically from Khurram Dara, who has announced intentions to run against her. Dara claims James has leveraged “lawfare” against the crypto sector in the state.
