New York Attorney General Urges Congress to Slow GENIUS Act

New York Attorney General Letitia James has expressed concerns over the GENIUS Act, stating that the current version of the bill lacks sufficient protections for the American public. In a letter sent to Congress, James urged lawmakers to slow down the legislative process and ensure that any stablecoin legislation balances innovation with the protection of the banking system.

James has previously written to Congress regarding the risks associated with the unchecked proliferation of digital assets. In April, she advocated for several principles to be included in any digital asset legislation, such as onshoring stablecoins and preventing cryptocurrencies from being used in retirement accounts. In June, she submitted a statement to the House Financial Services Committee, criticizing the Digital Asset Market Clarity Act for not adequately protecting America's interests, investors, and national security.

In her latest letter, James proposed significant changes to the GENIUS Act. She suggested that stablecoin issuers should be regulated as banks and that non-bank issuers should be excluded from the bill. Additionally, she recommended that stablecoin issuers be required to be based in the U.S., citing concerns about foreign issuers of U.S. dollar-denominated stablecoins operating in the market. James emphasized the importance of maintaining control over dollar-pegged stablecoin issuers, especially as their ownership of U.S. Treasuries becomes systemically important to the U.S. Treasury markets.

James also proposed that stablecoin issuers be required to use digital identity technology in all stablecoin purchases and transactions. She argued that without digital identity, law enforcement's ability to prevent sanctions evasion, terrorist and illicit financing, money laundering, and violations of various federal and state anti-fraud statutes would be compromised. This proposal aims to enhance law enforcement capabilities and protect national security.

The Senate passed the GENIUS Act earlier this month, and the House of Representatives has its own stablecoin bill, the STABLE Act, under consideration. However, there are significant differences between the two versions, and it remains unclear what the House will do moving forward. Rep. French Hill, the House Financial Services Committee chair, has acknowledged these differences and the need to address them.