NY prosecutors raise alarm over GENIUS Act on fraud

Five New York prosecutors warned that the GENIUS Act could increase fraud risks, saying stablecoin issuers such as Tether and Circle have been incentivized not to work with law enforcement — a dynamic they say can allow firms to profit from crimes involving stablecoins ^[1][3].

Officials including New York Attorney General Letitia James and Manhattan DA Alvin Bragg argued the statute grants legitimacy to stablecoins while failing to require issuers to freeze or return victim funds, which prosecutors say weakens their ability to protect victims; the framework was enacted when President Donald Trump signed the GENIUS Act into law in July, officials told reporters ^[3][2].

The warnings have intensified political and regulatory scrutiny, with local prosecutors and analysts flagging potential gaps in enforcement and victim recovery as debates continue over how the GENIUS Act will operate in practice ^[2][4].

New York prosecutors say the GENIUS Act, as written, could increase fraud risks and impair victim recovery unless accompanied by clearer enforcement tools or amendments to ensure issuers cannot effectively profit from criminal activity involving stablecoins ^[1][2][3].