US prosecutors accuse stablecoin laws of allowing crypto companies to profit from fraud.
PANews reported on February 2nd that, according to CNN, New York Attorney General Letitia James, Manhattan District Attorney Alvin Bragg, and several other prosecutors recently sent a joint letter to federal senators criticizing the GENIUS Act, a stablecoin regulatory bill, for serious flaws. They stated that the act fails to effectively protect victims of fraud and may provide legal cover for stablecoin issuers to "profit from fraud." The prosecutors accused the bill of establishing bank-like reserve requirements for stablecoins but lacking provisions mandating that companies return stolen funds to victims. This deficiency, they argued, would "embolden stablecoin issuers and even provide legal cover for them to continue controlling stolen funds instead of returning them to victims."
The letter further accuses the two major issuers of specific actions: Tether, while capable of freezing suspicious USDT transactions, only handles them on a case-by-case basis when cooperating with federal law enforcement agencies; while Circle is accused of holding rather than returning funds to victims even after agreeing to freeze them, and earning interest by investing in these underlying assets, which constitutes a “clear” economic incentive to refuse law enforcement’s requests.
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