NY Attorney General Criticizes GENIUS Act, Citing Stablecoin Risks and Regulatory Gaps

New York Attorney General Letitia James has raised concerns over the U.S. Senate’s proposed stablecoin legislation, the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins of 2025), warning that the bill lacks sufficient safeguards to protect the American public and financial system. In an eight-page letter to Congress on Monday, James urged lawmakers to slow the legislative process and craft more robust regulations that foster innovation while preserving the integrity of the U.S. banking system.

James, a long-time critic of loosely regulated digital assets, emphasized the need for stricter oversight. She proposed that only banks be allowed to issue stablecoins and called for the exclusion of non-bank entities. Additionally, she advocated for requiring stablecoin issuers to be based in the U.S., warning that the current bill leaves a “Tether loophole” by allowing foreign issuers of dollar-pegged stablecoins, potentially undermining national economic security.

Highlighting systemic risks, James stressed that foreign-controlled stablecoin issuers could disrupt U.S. Treasury markets, especially as their holdings grow. She also pushed for digital identity requirements for stablecoin users to help law enforcement counter illicit activities such as money laundering, sanctions evasion, and terrorist financing.

This is not James’ first intervention on digital asset regulation. In April, she called for “common sense principles” in crypto legislation, including onshoring of stablecoins and restrictions on crypto in retirement accounts. In June, she criticized the House’s CLARITY Act for not adequately addressing investor protection and national security.

While the Senate has already passed the GENIUS Act, the House is considering its own version, the STABLE Act. Rep. French Hill acknowledged differences between the two bills, leaving the final outcome uncertain.