A group of New York district attorneys, including Attorney General Letitia James, is sounding the alarm over the GENIUS Act, the federal law regulating stablecoins.
According to a CNN report on Monday, the officials argue that the law doesn’t do enough to prevent fraud and could even give stablecoin issuers legal cover to engage in shady practices.
The letter, signed by James and four district attorneys, specifically calls out major stablecoin companies Tether and Circle, suggesting that both have profited from crimes in the digital currency market.
Tether and Circle Under the Microscope
In their letter, the officials argue that Tether’s approach to freezing suspicious USDT transactions is inconsistent, leaving many victims without any hope of recovering stolen funds.
“The reality for many victims… is that funds stolen in or converted to USDT will never be frozen, seized, or returned,” the letter reportedly stated.
“They 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.”
Circle, meanwhile, is described as claiming to fight financial fraud, but the letter claims its policies are “significantly worse than those of Tether” when it comes to helping victims.
Circle and Tether Respond
Circle’s chief strategy officer, Dante Disparte, pushed back, stating that the company prioritizes financial integrity and supports strong regulatory standards in the US and abroad:
“[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.
Suggested Readings (News continues below)We will continue to advance these standards.”
Tether also responded, saying it takes fraud and consumer harm seriously, maintaining a zero-tolerance approach to illicit activity.
However, the company highlighted that it does not have the same legal obligations as a US-regulated financial institution, pointing out that its headquarters are in El Salvador.
What the GENIUS Act Means
Signed into law by President Donald Trump in July, the GENIUS Act provides a framework for payment stablecoins in the US.
The law requires full implementation 18 months after enactment or within 120 days of US agencies approving related regulations.
Critics say that without stronger enforcement measures, the law could leave gaps that fraudsters might exploit.
NY Attorney General Election Could Shake Things Up
The timing of these warnings comes as Letitia James considers reelection.
She has not confirmed whether she will run again, but she could face a challenger from the crypto-friendly side of the political spectrum.
In November, Khurram Dara, a former Coinbase policy lawyer, announced his plan to run as a Republican, accusing James of using “lawfare” against the crypto industry in New York.
Both candidates must file by April 6.
The Road Ahead for Crypto Oversight
With both the GENIUS Act and New York’s political landscape in flux, the future of stablecoin regulation remains uncertain.
Observers say how Tether, Circle, and other issuers respond could shape the next wave of US crypto policy, while New Yorkers keep an eye on who will lead the state’s top legal office in 2026.
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