New York Attorney General Letitia James issued a forceful critique today against the proposed stablecoin legislation, dubbed ‘GENIUS,’ arguing that the draft bill poses significant risks to consumers and attempts to circumvent rigorous state-level regulatory oversight.
In a formal statement released by her office, AG James asserted that the GENIUS framework is fundamentally flawed because it fails to mandate sufficient reserve backing and transparency standards necessary to protect retail investors. She warned that the legislation, if enacted, could greenlight stablecoins that lack verifiable, high-quality, liquid assets, creating a scenario ripe for catastrophic failure, similar to past crypto market collapses that disproportionately harmed everyday investors.
A primary objection raised by the Attorney General centers on regulatory jurisdiction. New York, through its Department of Financial Services (NYDFS), maintains one of the nation’s most stringent regulatory environments for digital assets under the BitLicense framework. James argued that the GENIUS bill is structured to preempt or severely dilute the authority of state regulators like the NYDFS, thereby allowing less-vetted stablecoin issuers to operate within the state without meeting established safety requirements.
“We have seen time and again the devastation unregulated or poorly regulated crypto products can cause,” James stated. “New York has worked diligently to build robust safeguards that protect our residents and maintain the integrity of our financial markets. The ‘GENIUS’ proposal jeopardizes those protections, offering a weak regulatory shell that prioritizes industry convenience over consumer safety. My office will continue to fight any legislation that seeks to dismantle essential consumer safeguards under the guise of financial innovation.”
AG James called upon federal lawmakers to significantly amend the proposal, demanding clearer requirements for 100% liquid reserves, mandatory third-party audits, and provisions that explicitly maintain the vital role of state attorneys general and financial regulators in overseeing stablecoin issuance and enforcement actions.
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