New York Prosecutors Criticize the GENIUS Law on Stablecoins

Five New York prosecutors denounce a major legal gap in the US regulation of stablecoins. According to them, the GENIUS law protects issuers more than fraud victims. Tether and Circle find themselves at the center of explosive accusations.

Tether and Circle Targeted by Criticism over the GENIUS Law

The Attorney General Letitia James does not mince her words. In a letter signed with four district attorneys, she believes that the GENIUS law does not meet its original objective: to prevent stablecoins from serving as vehicles for financial crime.

The text, enacted in July 2024 by Donald Trump, aimed to establish a clear regulatory framework for payment stablecoins in the United States.

The problem raised by the prosecutors lies in the absence of real constraints. Tether, headquartered in El Salvador, claims to enforce a “zero tolerance” policy toward illicit activities. 

However, the company specifies at the same time that it has “no absolute legal obligation” to respond to civil or criminal procedures from US states.

Circle, on its part, claims a position aligned with US and international standards. Dante Disparte, Chief Strategy Officer, recalls that the company already complies with the prevailing financial integrity rules. 

But for prosecutors, this stance remains cosmetic. They accuse Circle of displaying a compliance facade while maintaining policies considered less protective than those of Tether. An accusation that resonates as a slap for an actor presenting itself as a regulation ally.

This warning comes as Washington tries to unblock another major text: the CLARITY law. On Monday, February 2, the White House is organizing a meeting between crypto platforms and banking representatives to resolve the thorny issue of yields on stablecoins. This dossier could redefine the balance between innovation and consumer protection, a debate that also runs through the GENIUS law.

A Political Standoff Beyond the Technical Framework

Beyond technical reproaches, the affair reveals a political divide. Letitia James could face an unexpected opponent: Khurram Dara, former legal advisor to Coinbase, who is running for Attorney General under the Republican label. 

Dara accuses James of leading a “judicial smear campaign” against the crypto sector in the state of New York. Both candidates have until April 6 to submit their applications, turning this regulatory debate into an electoral issue.

The GENIUS law is expected to take effect 18 months after its enactment or 120 days after federal agencies approve regulations. However, this phased implementation leaves room for interpretation. 

For the New York prosecutors, GENIUS misses the mark. Instead of protecting consumers, the law would give them illusory recourse against companies domiciled abroad and legally unreachable. 

In summary, the regulatory war over stablecoins now pits state prosecutors against federal legislators. New York wants control, Washington seeks balance, and issuers navigate between promises of compliance and operational reality. The outcome of this battle will determine if stablecoins become a regulated financial tool or a permanent blind spot of American justice.