New York Attorney General Calls for Stronger Crypto Legislation

New York Attorney General Letitia James has called on Congress to bolster protections in pending stablecoin and crypto legislation, asserting that the current versions of the bills do not adequately safeguard investors. In a letter addressed to Congress, James criticized the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act for lacking the necessary regulatory safeguards.

James emphasized that these bills do not contain sufficient measures to protect the American public from the risks associated with unregulated cryptocurrency transactions. She warned that such transactions pose dangers to investors, the economy, and national security, particularly due to the potential for anonymous transactions that can facilitate criminal activity and fraud. James urged Congress to take the time necessary to draft legislation that enhances innovation while protecting the banking system, which she described as the envy of the world.

Both the STABLE Act and the GENIUS Act aim to regulate stablecoins, with the GENIUS Act having been passed by the US Senate last month in a bipartisan vote, and the STABLE Act having been passed by a House Committee in April for a full floor vote. James called for amendments to these bills to ensure that stablecoin issuers are regulated like banks, subjecting them to the same regulations to reduce systemic risk. She also proposed that stablecoin issuers provide Federal Deposit Insurance Corporation insurance protection for stablecoin deposits and require digital identity technology for all transactions to prevent anonymous criminal use.

James further urged protection for local banks, expressing concern that stablecoins may provide an undeserved advantage over community banks that are already in decline. Proponents of the stablecoin legislation, such as Senators Kirsten Gillibrand and Bill Hagerty, argue that it will protect consumers, enable responsible innovation, and safeguard the dominance of the US dollar. However, James's critique highlights the need for more stringent regulatory measures to ensure the safety and stability of the financial system.

In addition to her concerns about the stablecoin bills, James also criticized the Digital Asset Market Clarity (CLARITY) Act. In a letter last month, she argued that the proposed legislation protects bad actors’ anonymity and fails to provide adequate fraud prevention measures. She stated that the CLARITY Act creates a technology-specific loophole that undermines nearly a century of securities laws designed to protect America and its investors. James's stance underscores her commitment to ensuring that regulatory frameworks for digital assets are robust and effective in safeguarding the interests of investors and the broader financial system.

James has a history of taking action against digital assets. In April, she urged Congress to prevent US retirement funds from investing in crypto or crypto exchange-traded funds, deeming them to have "no intrinsic value." She has also sued several crypto companies and exchanges during her tenure, demonstrating her proactive approach to regulating the cryptocurrency industry. Her latest call to Congress reflects her ongoing efforts to advocate for stronger protections and regulations in the crypto space, aiming to mitigate the risks associated with unregulated digital assets and ensure the stability of the financial system.