NY Prosecutors Warn GENIUS Act Shields Crypto Firms

Crypto News Regulation

New York Prosecutors Warn GENIUS Act Could Shield Crypto Issuers From Fraud

Written by Aaron S.,

Editor-In-Chief

Last Updated: February 02, 2026

Key Takeaways

New York prosecutors say the GENIUS Act may let stablecoin issuers avoid accountability and weaken fraud protection;
The letter accused Tether of freezing stolen USDT selectively, which left many victims without a way to recover lost funds;
Circle faced claims of weaker anti-fraud support, though it insists it follows all US financial and consumer protection rules.

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New York Prosecutors Warn GENIUS Act Could Shield Crypto Issuers From Fraud

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A group of prosecutors from New York has voiced concerns about the US federal stablecoin proposal known as the GENIUS Act.

They argue the bill does not give enough attention to fraud prevention and could make it harder to protect victims of financial crimes.

According to a CNN report released on February 2, New York Attorney General Letitia James and four district attorneys signed a letter criticizing the bill. They warned that the GENIUS Act might “provide legal cover” for stablecoin issuers.

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The letter focused on two issuers, Tether and Circle. It accused Tether of freezing suspicious USDT USDT $1.00 transactions only when it chooses to, which left many victims unable to recover their stolen funds.

Circle was also criticized for presenting itself as supportive of anti-fraud efforts but offering weaker protection to victims. The letter said Circle’s response to fraud cases was even less effective than Tether’s.

Circle’s chief strategy officer, Dante Disparte, said the company follows all financial integrity rules and supports stronger consumer protection under the GENIUS Act. He emphasized that Circle operates as a regulated US institution and aims to maintain high compliance standards.

Tether stated that it enforces a strict policy against illegal activity but noted that it is not required by law to follow the same state-level procedures as US-based financial firms.

Recently, six Democratic senators raised concerns about Deputy Attorney General Todd Blanche’s handling of cryptocurrency regulations. What did they say? Read the full story.