New York Attorney General Letitia James has urged Congress to enhance cryptocurrency legislation to better protect investors. In a letter to congressional leaders, she emphasized the need for stronger regulatory measures on stablecoins, which are digital currencies pegged to assets like the U.S. dollar. The United States Senate recently passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, aiming to legalize and regulate stablecoins.
Attorney General James cautioned that without substantial oversight, legalizing stablecoin issuance could endanger the public. She suggested that issuers should be regulated similarly to banks and recommended Federal Deposit Insurance Corporation (FDIC) insurance for stablecoin deposits.
“Many people across the country invest millions of dollars in cryptocurrencies, yet our laws fail to protect them and their money from fraud,” said Attorney General James. “Unregulated cryptocurrency transactions are a danger to investors, the economy, and national security.”
The GENIUS Act is accompanied by another bill under consideration called the Stablecoin Transparency and Accountability for a Better Ledger Economy Act (STABLE) Act. However, according to Attorney General James, neither bill provides adequate safeguards against risks associated with stablecoins.
In her letter, she advocated for requiring digital identity technology in transactions to combat scams and market manipulation while supporting community banks against non-bank issuers’ proliferation.
Attorney General James proposed several modifications: regulating issuers as banks; enhancing supervision; ensuring redemption of stablecoins; using digital identity credentials; onshoring issuers; supporting community banks; and preserving state supervisory authority.
Additionally, she criticized the Digital Asset Market Clarity (CLARITY) Act in her statement before the U.S. House Financial Services Committee for failing to address fraud prevention adequately.
This initiative follows other efforts by Attorney General James in tackling cryptocurrency-related issues. Her office recently froze $300,000 linked to scammers targeting Russian-speaking New Yorkers and previously filed lawsuits against fraudulent schemes involving significant sums of cryptocurrency.
