NY Prosecutors Warn of Fraud Risks in GENIUS Act Stablecoin Regulations
New York prosecutors have raised alarms about potential enforcement gaps in the proposed GENIUS Act, a federal stablecoin law. In a letter signed by Attorney General Letitia James and four district attorneys, authorities highlighted the lack of robust fraud protections, particularly for victims of theft or conversion.
The framework may grant legal immunity to issuers while leaving victims without recourse. Tether and Circle were specifically cited for inconsistent cooperation with law enforcement—Tether freezes only a fraction of suspicious transactions, while Circle's claims of partnership with authorities remain untested in the legislation.
Prosecutors emphasized that the current draft contains no mandate for issuers to honor all freeze requests or facilitate victim recoveries. This could destabilize oversight in the $150B stablecoin market, where Tether's USDT and Circle's USDC dominate 90% of circulation.
