GENIUS Act Lacks ‘Necessary Guardrails’ For Investor Protection, NYAG Letitia James Tells Congress

New York Attorney General Letitia James sounded the alarm on the U.S. Senate’s stablecoin invoice, warning Congress on Monday that the Guiding and Establishing National Innovation for U.S. Stablecoins of 2025 (GENIUS) Act — not less than because it at the moment stands — “do[es] not contain the necessary guardrails to protect the American public.”

In an eight-page letter despatched Monday, James urged Congress to decelerate its efforts to go stablecoin laws and “take the time necessary to draft legislation that will enhance innovation while protecting our banking system that is the envy of the world.”

This just isn’t James’ first letter to Congress warning of the risks of what she has known as “the unchecked proliferation of digital assets.” In an April letter to 4 members of Congress, James requested that any digital asset laws included a number of “common sense principles” together with onshoring stablecoins and disallowing cryptocurrencies in retirement accounts. In June, James submitted a press release to the House Financial Services Committee in regards to the House’s crypto market construction invoice, the Digital Asset Market Clarity Act (CLARITY), which she claimed “does not do enough to protect America’s interests, investors, and national security.”

In her most up-to-date letter, James laid out a proposed overhaul of the invoice, starting with regulating stablecoin issuers as banks and “eliminating non-bank issuers” from the invoice. She added that stablecoin issuers needs to be required to be domiciled within the U.S., calling out the GENIUS Act for “leav[ing] room for foreign issuers of U.S. dollar denominated and backed stablecoins to operate, essentially creating the ‘Tether loophole.’”

“The U.S. must maintain control over dollar-pegged stablecoin issuers — especially as stablecoin issuance grows and their ownership of U.S. Treasuries becomes systemically important to the U.S. Treasury markets,” James wrote. “Congress should not risk American markets being held hostage by foreign-domiciled stablecoin issuers.”

James additionally advised that stablecoin issuers be required to determine holders through “digital identity credentials.”

“Without digital identity, the ability of law enforcement to stop parties from engaging in sanctions evasion, terrorist and illicit financing, money laundering, and violations of the Foreign Corrupt Practices Act, the Lobbying Disclosure Act and other federal and state anti-fraud statutes will be hobbled,” James wrote.

The Senate handed the GENIUS Act earlier this month. The House of Representatives has its personal stablecoin invoice, the STABLE Act, sitting earlier than it, although it might additionally select to take up the Senate model as-is. Rep. French Hill, the House Financial Services Committee chair, has mentioned on a number of events that the House and Senate model have essential variations that must be ironed out, and it is unclear simply what the House will do as of press time.