New York Attorney General Urges Congress to Strengthen Stablecoin Laws

New York Attorney General Letitia James has urged Congress to enhance two proposed laws concerning stablecoins to better safeguard investors. She argues that the current drafts of these bills do not adequately protect investors and could potentially facilitate anonymous transactions, which might be exploited by criminals for fraudulent activities or to compromise national security. James advocates for stablecoin companies to be regulated similarly to banks, given their comparable operational mechanisms and the significant risks they pose if left unchecked.

Both proposed bills, the GENIUS Act and the STABLE Act, focus on regulating stablecoins. The Senate passed the GENIUS Act last month with bipartisan support, while the House committee moved the STABLE Act to a full floor vote in April. James suggests that stablecoin deposits should be insured by the Federal Deposit Insurance Corporation, akin to bank accounts, and that all transactions should utilize digital IDs to prevent anonymous misuse. She also expresses concern that stablecoins could negatively impact small, local banks that are already facing challenges.

James has also criticized the proposed Digital Asset Market Clarity (CLARITY) Act, asserting that it allows for anonymity in cryptocurrency transactions, which could lead to fraud. She believes this act weakens existing laws designed to protect investors and advocates for stronger regulations to prevent scams. James has a history of speaking out against cryptocurrencies, having previously urged Congress to prevent retirement savings from being invested in crypto or related funds, stating that they lack intrinsic value. She has also taken legal action against several crypto companies during her tenure as Attorney General.

Supporters of the stablecoin laws, including Senators Kirsten Gillibrand and Bill Hagerty, argue that these laws will protect consumers and foster innovation in the crypto world while maintaining the US dollar’s global strength. James agrees on the importance of innovation but insists that laws must prioritize public safety and the stability of the banking system. She has called for digital identity technology to be used in all stablecoin purchases and transactions to enhance security and transparency, and has proposed clear, stringent disclosure requirements for all crypto businesses to ensure investors are well-informed and protected from potential fraud.