NY Attorney General Warns Against Rushed Stablecoin Legislation
New York Attorney General Letitia James has issued a stark warning to Congress regarding the GENIUS Act, formally known as the Guiding and Establishing National Innovation for U.S. Stablecoins of 2025. In an eight-page letter, James stated that the bill “does not contain the necessary guardrails to protect the American public.”
She urged lawmakers to slow the legislative process and draft a balanced framework that fosters innovation while safeguarding financial systems.
Digital Identity and Bank-Like Oversight Proposed for Stablecoin Issuers
Among the most significant proposals in James’ letter is the requirement for stablecoin issuers to be regulated as banks. She advocates for the elimination of non-bank stablecoin issuers from the bill entirely.
James emphasized the need for stablecoin firms to be domiciled within the United States, criticizing the current version of the GENIUS Act for enabling foreign issuers of U.S.-backed stablecoins to operate freely. This, she warned, creates a potential loophole similar to what critics call the “Tether loophole.”
National Security Concerns: Digital Identity for Stablecoin Holders
To strengthen law enforcement and national security capabilities, James recommended the use of digital identity technology in all stablecoin transactions.
“Without digital identity, law enforcement will be hindered in combating sanctions evasion, money laundering, terrorist financing, and fraud,” she wrote.
U.S. Treasury Risks and Systemic Exposure
As stablecoin issuers increasingly hold U.S. Treasuries, James warned that their role in the market could become systemically important.
She cautioned that foreign-domiciled issuers could pose a threat to U.S. Treasury markets and financial sovereignty if not properly regulated.
Legislative Outlook: House Faces Decision on GENIUS vs. STABLE Act
The U.S. Senate recently passed the GENIUS Act, but the House of Representatives is still debating whether to adopt that version or move forward with its own STABLE Act.
Representative French Hill, Chair of the House Financial Services Committee, has indicated that the two versions of the bill differ significantly and must be reconciled.
The stablecoin debate is heating up, and regulatory clarity is expected to be a key issue in shaping the future of digital finance in the United States.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.