New York Attorney General criticizes GENIUS stablecoin bill for inadequate consumer protection

New York Attorney General Letitia James, along with four local district attorneys in the state, recently sent a letter to several Democratic lawmakers criticizing the "GENIUS Stablecoin Act," which was signed into law by Trump last year, for significant flaws in consumer protection, particularly its failure to require stablecoin issuers to return stolen funds in the event of theft.

The letter specifically names Tether (USDT) and Circle (USDC), arguing that the two major stablecoin issuers can still earn interest on related assets after funds are stolen, while victims lack effective recourse. New York prosecutors pointed out that although the act grants stablecoins greater "legitimacy endorsement," it does not simultaneously strengthen key regulatory requirements such as anti-terror financing, anti-money laundering, and prevention of crypto fraud. The GENIUS Act is currently entering the implementation phase, requiring stablecoins to be fully backed by U.S. dollars or highly liquid assets and mandating annual audits for issuers with a market capitalization exceeding $50 billion. However, New York prosecutors believe these measures are still insufficient to address the widespread use of stablecoins in illegal fund transfers.

According to Chainalysis data, approximately 84% of illegal crypto transaction volume will involve stablecoins by 2025, prompting New York to call for further strengthening of the regulatory framework to better protect consumer rights.