An interesting point in the regulatory fight around stablecoins. New York Attorney General Letitia James, along with colleagues from other districts, has just issued an open letter to Senate leadership regarding the GENIUS Act. And their position is quite firm.

The essence of the complaint is simple: the law allegedly legitimizes stablecoins on paper, but in practice leaves victims of fraud unprotected. Prosecutors say that GENIUS establishes reserve requirements for issuers but does not provide a mechanism for returning stolen assets to victims. This creates a gap that could encourage stablecoin issuers to simply keep illegal proceeds for themselves.

What particularly concerns law enforcement is the weakening of tools to combat money laundering, terrorism financing, and drug trafficking. The letter was signed by Manhattan District Attorney Alvin Bragg. They note that major issuers like Tether and Circle already show reluctance to cooperate with authorities, even though they technically could freeze funds at any moment.

In fact, the New York AG and his team warn that the law gives stablecoins a stamp of legitimacy without real consumer protection guarantees. And this is especially relevant now, as stablecoins are becoming an increasingly key element of the digital asset ecosystem. It will be interesting to see how this develops further in the Senate.