U.S. prosecutors accuse stablecoin bill of enabling crypto firms to profit from fraud

According to CNN, New York Attorney General Letitia James and several prosecutors, including Manhattan District Attorney Alvin Bragg, recently sent a joint letter to federal senators criticizing the U.S. stablecoin regulation bill, the "GENIUS Act," for serious flaws. They stated that it fails to effectively protect victims of fraud and may provide legal cover for stablecoin issuers to "profit from fraud."

In the letter, the prosecutors accused that while the bill establishes bank-like reserve requirements for stablecoins, it lacks a mandatory provision requiring companies to return stolen funds to victims. This omission would "embolden stablecoin issuers and even provide them with legal cover when they actively decide to continue controlling stolen funds instead of returning them to victims."

The letter further accused two major issuers of specific behaviors: Tether, while capable of freezing suspicious USDT transactions, only handles cases on an individual basis in cooperation with federal law enforcement; while Circle is accused of being inclined to hold rather than return funds to victims even after agreeing to freeze them, earning interest by investing these underlying assets, which constitutes a "clear" economic incentive to refuse law enforcement requests.