New York Prosecutors Warn GENIUS Act Could Enable Stablecoin Fraud
Officials claim legislation would let Tether and Circle profit from crimes while avoiding law enforcement cooperation
The prosecutors have issued their warning as Congress debates the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which would establish a federal framework for stablecoin regulation. According to the officials, the bill as written could shield stablecoin issuers from obligations to assist in fraud investigations and asset recovery.
Tether, issuer of the world largest stablecoin USDT, and Circle, which issues USDC, together control the vast majority of the stablecoin market. The prosecutors argue that current provisions in the GENIUS Act would remove incentives for these companies to freeze assets connected to fraud, money laundering, and other financial crimes.
The concerns highlight an ongoing tension in crypto regulation: balancing innovation-friendly policies against law enforcement needs. Stablecoins have been increasingly used in ransomware payments, sanctions evasion, and investment fraud schemes.
Analysis
Why This Matters
Stablecoins process over ten trillion dollars in annual volume, making their regulatory framework critical for financial crime prevention. If major issuers have little incentive to cooperate with law enforcement, fraud victims may have no recourse to recover stolen funds.
Background
The GENIUS Act emerged from bipartisan efforts to provide regulatory clarity for stablecoins following the 2022 crypto market collapse. However, enforcement officials worry the bill prioritizes industry growth over consumer protection.
Key Perspectives
Proponents of the GENIUS Act argue that clear federal rules will actually improve compliance by establishing uniform standards. Critics, including these New York prosecutors, contend the current draft creates enforcement gaps that criminals will exploit.
What to Watch
Congressional negotiations on amendments addressing these law enforcement concerns. Whether Tether and Circle respond publicly to the allegations. Any movement on competing stablecoin bills that may include stronger enforcement provisions.