In a development that underscores persistent tensions between regulatory authorities and the cryptocurrency industry, New York's leading prosecutors have expressed apprehensions regarding the adequacy of the GENIUS Act, a recent law intended to regulate stablecoins. Their critique centers on the law’s perceived insufficiency in safeguarding victims of financial fraud, especially within the stablecoin market, which has rapidly expanded over recent years.
According to a letter signed by New York Attorney General Letitia James and four district attorneys, the legislation effectively grants undue legitimacy to stablecoins while enabling issuers to circumvent crucial regulatory obligations. These requirements are considered essential by the prosecutors for effectively battling financial crimes such as terrorism financing, drug trafficking, and money laundering.
The prosecutors identified Tether and Circle Internet Group Inc., the two dominant stablecoin providers, as entities that have reportedly obstructed efforts by law enforcement to recover misappropriated funds and return them to victims. Despite these allegations, both companies have profited as fraudulent activities continue to afflict the stablecoin ecosystem.
Circle, through its Chief Strategy Officer Dante Disparte, responded by stating that the company has consistently prioritized financial integrity and supports both U.S. and international regulatory standards for stablecoins. Disparte emphasized the company’s commitment to these principles will persist as the GENIUS Act becomes fully operational. Tether did not offer comments on the matter at the time of reporting.
The GENIUS Act, signed into law last year, seeks to boost the integrity of the monetary system by imposing critical requirements on stablecoin issuance. Among the stipulations, stablecoins must be entirely backed by dollars or assets of equivalent liquidity, issuers with substantial operations must undergo annual audits, and new standards have been introduced for the issuance of foreign stablecoins.
Despite these measures, some political figures, including Senator Elizabeth Warren, have raised alarms regarding the possible risks the legislation poses to consumers and the broader financial infrastructure. Warren has called for more stringent enforcement to prevent corruption, maintain financial stability, and avoid conflicts of interest, especially those associated with ventures linked to former President Donald Trump.
The market’s response to these developments has been mixed. Following a trading session where Circle's stock declined by 7.93% to $58.86, the shares experienced a modest rebound of 1.43% in after-hours trading, reaching $59.70. According to Benzinga’s Edge Stock Rankings, Circle’s stock continues to exhibit a downward trend across short, medium, and long-term periods.
These unfolding circumstances reflect the ongoing challenges in balancing innovation in the digital currency sector with adequate protections against financial crimes and systemic risks. As regulators and market participants navigate this evolving landscape, the effectiveness of the GENIUS Act and the behavior of major stablecoin issuers remain critical focal points.