Several New York district attorneys have reportedly warned about the US federal stablecoin law, the GENIUS Act, claiming it fails to adequately address fraud.
According to a Monday CNN report, New York Attorney General Letitia James and four district attorneys signed onto a letter saying that the GENIUS Act will “provide legal cover” for stablecoin issuers to potentially participate in fraud.
The letter reportedly pointed a finger at issuers Tether and Circle, claiming that the companies have profited off crimes in stablecoin markets, specifically accusing Tether of only freezing some suspicious transactions in USDt ($USDT).
“The reality for many victims, therefore, is that funds stolen in or converted to $USDT will never be frozen, seized, or returned,” said the letter, according to CNN. “They [Tether] currently decide on a case-by-case basis when they will assist law enforcement in recovering funds for victims, and nothing prevents them from stopping all reissuance entirely.”
Regarding Circle, the letter said the stablecoin issuer “claims to be an ally in the fight against financial fraud,” but its policies were “significantly worse than those of Tether for victims of fraud.”
Chief strategy officer Dante Disparte reportedly said Circle “has always prioritized financial integrity and advancing US and global regulatory standards for stablecoins,” adding:
“[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. We have followed prevailing rules as a US regulated financial institution, and we will continue to advance these standards.”
Tether reportedly said that it “takes fraud, consumer harm, and the misuse of $USDT extremely seriously and maintains a zero-tolerance policy toward illicit activity,” but the company did not have “a blanket legal obligation to comply with state-level civil or criminal processes in the way a US-regulated financial institution would.” The stablecoin issuer’s headquarters is in El Salvador.
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The GENIUS Act, which was signed into law by US President Donald Trump in July, established a framework for payment stablecoins in the country. The bill requires implementation 18 months after enactment or 120 days after US agencies approve regulations related to the law.
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Letitia James, who as of Monday had not made any public statements indicating she was not running for reelection as New York Attorney General this year, could face a challenger representing interests aligned with many in the crypto industry.
In November, former Coinbase policy lawyer Khurram Dara said he plans to run as a Republican to unseat James, claiming that the attorney general had engaged in “lawfare” against the crypto industry in the state. Both potential candidates have an April 6 deadline to file.
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