New York Attorney General Letitia James slams stablecoin law GENIUS citing consumer protection concerns

New York Attorney General Letitia James, along with four New York district attorneys, sent a letter to key Democratic lawmakers expressing concerns over the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law last year. They argue the law grants legitimacy to stablecoin issuers like Circle and Tether while failing to mandate mechanisms for returning stolen funds to victims, thus undermining consumer protection against fraud, money laundering, and illicit financing.

The prosecutors noted that while the GENIUS Act requires stablecoins to be fully backed and mandates audits for large issuers, these measures are insufficient, especially given that Chainalysis estimates 84% of illicit crypto transaction volume in 2025 involved stablecoins. The letter specifically criticized Tether for only freezing stolen funds "in some limited circumstances" without acknowledging a legal obligation, and accused Circle of being worse, as it refuses to temporarily freeze funds without a signed judicial order, often resulting in the funds being moved before authorities can act.

Tether responded by stating it is not U.S. domiciled and lacks a blanket legal obligation to comply with state processes but voluntarily works with U.S. law enforcement. Circle, through its Chief Strategy Officer Dante Disparte, emphasized its commitment to following applicable financial integrity rules and enhancing consumer protection norms as the law is implemented.

(Source：The Block)