New York Attorney General Letitia James sounded the alarm on the U.S. Senate’s stablecoin bill, warning Congress on Monday that the Guiding and Establishing National Innovation for U.S. Stablecoins of 2025 (GENIUS) Act — at least as it currently stands — “do[es] not contain the necessary guardrails to protect the American public.”
In an eight-page letter sent Monday, James urged Congress to slow down its efforts to pass stablecoin legislation 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 is not James’ first letter to Congress warning of the dangers of what she has called “the unchecked proliferation of digital assets.” In an April letter to four members of Congress, James asked that any digital asset legislation included several “common sense principles” including onshoring stablecoins and disallowing cryptocurrencies in retirement accounts. In June, James submitted a statement to the House Financial Services Committee about the House’s crypto market structure bill, 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 recent letter, James laid out a proposed overhaul of the bill, beginning with regulating stablecoin issuers as banks and “eliminating non-bank issuers” from the bill. She added that stablecoin issuers should be required to be domiciled in 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 also suggested that stablecoin issuers be required to identify holders via “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 passed the GENIUS Act earlier this month. The House of Representatives has its own stablecoin bill, the STABLE Act, sitting before it, though it could also choose to take up the Senate version as-is. Rep. French Hill, the House Financial Services Committee chair, has said on multiple occasions that the House and Senate version have important differences that need to be ironed out, and it’s unclear just what the House will do as of press time.