Five New York prosecutors denounce a major legal loophole in the American regulation of stablecoins. According to them, the GENIUS law would protect issuers more than victims of fraud. Tether and Circle find themselves at the heart of explosive accusations.
In brief
- The New York Attorney General and four district attorneys say the GENIUS Act provides “legal cover” for stablecoin issuers.
- Tether and Circle are accused of profiting from crime while refusing to fully cooperate with authorities.
- According to prosecutors, Tether decides on a case-by-case basis to assist law enforcement, without binding obligations.
Tether and Circle targeted by criticism of the GENIUS law
Attorney General Letitia James does not mince her words. In a letter signed with four district attorneys, she believes that the GENIUS law does not meet its original objective: to prevent stablecoins from serving as a vehicle for financial crime.
The text, promulgated in July 2024 by Donald Trump, nevertheless aimed to establish a clear regulatory framework for payment stablecoins in the United States.
The problem raised by prosecutors is the lack of real constraints. Tether, headquartered in El Salvador, claims to apply “zero tolerance” to illicit activities.
However, the company clarifies in the same breath that it has “no absolute legal obligation” to respond to civil or criminal proceedings in American states.
Circle, for its part, claims a positioning aligned with American and international standards. Dante Disparte, director of strategy, recalls that the company already respects the financial integrity rules in force.
But for prosecutors, this posture remains cosmetic. They criticize Circle for displaying a facade of compliance while maintaining policies deemed less protective than those of Tether. An accusation which resonates as a snub for an actor who presents himself as an ally of regulation.
This warning comes as Washington tries to unblock another major text: the CLARITY law. This Monday, February 2, the White House is organizing a meeting between crypto platforms and banking representatives to resolve the thorny issue of returns on stablecoins. This file could redefine the balance between innovation and consumer protection, a debate which also runs through the GENIUS law.
A political standoff that goes beyond the technical framework
Beyond the technical criticisms, the affair reveals a political divide. Letitia James could face an unexpected opponent: Khurram Dara, former legal advisor to Coinbase, who is running for attorney general under the Republican label.
Dara accuses James of waging a “judicial smear campaign” against the crypto sector in New York State. The two candidates have until April 6 to submit their candidacy, transforming this regulatory debate into an electoral issue.
The GENIUS Act is scheduled to take effect 18 months after it is signed into law or 120 days after federal agencies approve the regulations. However, this gradual implementation leaves room for interpretation.
For New York prosecutors, GENIUS misses the mark. Instead of protecting consumers, the law would give them illusory recourse against companies domiciled abroad and legally elusive.
In short, the stablecoin regulatory war now pits state prosecutors against federal lawmakers. New York wants control, Washington seeks balance, and issuers navigate between promises of compliance and operational reality. The outcome of this battle will determine whether stablecoins become a regulated financial tool or a permanent blind spot in American justice.
Maximize your Tremplin.io experience with our 'Read to Earn' program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.
