NY Attorney General Pushes for Stronger Crypto Laws to Protect Investors

On Tuesday, July 1, 2025, New York Attorney General Letitia James urged congressional leaders to enhance cryptocurrency legislation to better protect investors.

In a letter to Congress, James called for stronger regulations in the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, recently passed by the U.S. Senate to legalize and regulate stablecoins.

Stablecoins are cryptocurrencies tied to assets like the U.S. dollar, often used in anonymous transactions that can be linked to criminal activities. James expressed concerns that legalizing stablecoins without robust oversight could endanger investors, the economy, and national security.

James highlighted that the GENIUS Act and a related bill, the Stablecoin Transparency and Accountability for a Better Ledger Economy Act (STABLE), lack sufficient safeguards to mitigate risks associated with stablecoins. She noted that anonymous stablecoin transactions could facilitate criminal activities, including those involving gangs and terrorist organizations, posing threats to national security. To address these issues, James proposed several modifications to the legislation.

Her recommendations include regulating stablecoin issuers similarly to banks, with stricter supervision and capital requirements to allow real-time risk monitoring and reduce pressure on financial institutions. She also advocated for measures ensuring investors can redeem stablecoins on demand and that deposits are protected through Federal Deposit Insurance Corporation (FDIC) insurance. Additionally, James called for the use of digital identity technology in stablecoin transactions to enhance national security, curb scams, prevent market manipulation, and reduce risks of money laundering, terrorist financing, and sanctions evasion.

James further emphasized the importance of requiring stablecoin issuers to operate within the U.S. to ensure compliance with oversight and enforcement measures. She urged Congress to support community banks, noting their critical role in serving rural and underserved communities, and warned that unregulated stablecoin issuers could undermine financial stability in these areas. Additionally, she stressed the need to preserve state supervisory authority and bolster state and federal law enforcement efforts to combat fraud.

In a related action, James submitted a statement to the U.S. House Financial Services Committee regarding the Digital Asset Market Clarity (CLARITY) Act, another proposed cryptocurrency regulation. She criticized the CLARITY Act for failing to provide adequate regulatory measures, protecting the anonymity of bad actors, and enabling market manipulation. James also cautioned against provisions that could limit state-level investor protection laws.