New York Authorities Raise Concerns Over GENIUS Act and Stablecoin Risks
Judicial authorities in New York have expressed serious concerns regarding the GENIUS Act, legislation regulating the issuance of stablecoins, citing loopholes that could allow companies to profit from fraudulent activities without clear accountability.
The New York Attorney General, together with four local prosecutors, stated that the law grants unconditional legitimacy to stablecoin issuers such as Tether and Circle, while allowing them to circumvent basic regulatory obligations related to anti-money laundering, anti-terrorism financing, and fraud prevention.
The law imposes reserve requirements similar to those applied to banks, mandating that companies maintain liquid assets sufficient to cover all issued stablecoins. However, it does not include provisions requiring companies to return stolen funds to fraud victims. Critics argue that this could incentivize issuers to retain funds rather than returning them.
According to the prosecutors, both Tether and Circle have not fully cooperated with authorities’ efforts to recover stolen funds, while generating annual profits of up to $1 billion from investing reserve assets, including funds linked to fraudulent activities. Circle, in particular, has been accused of at times preventing restitution to victims while benefiting from investment returns on those funds.
Both Tether and Circle maintain that they work closely with U.S. federal and state authorities, comply with applicable financial laws, and are committed to enhancing protection and transparency standards.
This warning comes amid the rising popularity of stablecoins, which accounted for approximately 63% of suspicious transactions in the cryptocurrency market last year, with total stablecoin transaction volumes reaching $33 trillion. Observers warn that insufficient oversight and consumer protection could expose the traditional financial system to systemic risks.
Critics emphasize that despite support from major crypto companies, the GENIUS Act lacks fundamental safeguards for investors and fraud victims, effectively benefiting issuers more than protecting the public.