New York Attorney General criticizes GENIUS stablecoin bill: insufficient consumer protection

New York Attorney General Letitia James and four state attorneys general recently wrote to several Democratic lawmakers criticizing the GENIUS Stablecoin Act, signed into law by President Trump last year, for significant flaws in consumer protection, particularly its failure to require stablecoin issuers to return stolen funds. The letter specifically names Tether (USDT) and Circle (USDC), arguing that these two stablecoin issuers can still generate interest income on stolen assets, while victims lack effective recourse. The New York prosecutors point out that while the act grants stablecoins greater "legitimacy," it fails to simultaneously strengthen key regulatory requirements such as counter-terrorism financing, anti-money laundering, and prevention of crypto fraud. The GENIUS Act is currently entering its implementation phase, requiring stablecoins to be fully backed by US dollars or highly liquid assets and to conduct annual audits of issuers with a market capitalization exceeding $50 billion. However, the New York prosecutors believe these measures are insufficient to address the widespread use of stablecoins in illicit financial transactions. According to Chainalysis data, approximately 84% of illicit crypto transactions in 2025 involved stablecoins, prompting New York to call for further strengthening of the regulatory framework to better protect consumer rights.