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Fed Legislation on Stablecoins: A Call for Guardrails from New York AG

New York Attorney General Letitia James has expressed serious concerns regarding proposed federal legislation on stablecoins, highlighting the potential risks to U.S. financial stability.

In her recent letter to Congress, she criticized the STABLE Act and the GENIUS Act for lacking essential safeguards for investors.

James emphasized the importance of robust oversight for stablecoin issuers, advocating for their regulation akin to that of banks.

She called for regulatory measures that include Federal Reserve supervision, capital standards, and bankruptcy-remote structures to protect customer funds.

Moreover, AG James argued that interest-bearing stablecoins should fall under securities regulation, ensuring stricter compliance for these financial products.

She also recommended implementing digital identity requirements for wallet holders to enhance anti-money laundering efforts.

As both the STABLE Act and the GENIUS Act move through Congress, James warned that their differences necessitate reconciliation for effective national legislation.

The GENIUS Act aims for a dual regulatory framework, while the STABLE Act pushes for enhanced transparency and accountability.

James concluded by urging lawmakers to carefully draft legislation that balances innovation with the necessity of a safe banking system.

With the House GOP declaring 'Crypto Week' for mid-July, the future of stablecoin regulation hangs in the balance as discussions move forward.