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Lawmakers Urged to Tighten Stablecoin Regulations to Protect Fraud Victims

New York Attorney General Letitia James has raised alarm over the newly proposed GENIUS Act, which she claims fails to protect victims of cryptocurrency fraud.

In a letter addressed to Senate Democratic leaders, James and four district attorneys outlined how the act provides stablecoin issuers with legal protections.

They argue that this legal cover could enable these issuers to profit from fraudulent activities without adequate repercussions.

While the act does establish reserve requirements, it notably lacks provisions to ensure stolen funds are returned to victims.

This omission, according to James and the prosecutors, could discourage the return of illicit proceeds and strengthen the grip of fraudsters.

The prosecutors also emphasized that such gaps could severely undermine law enforcement's ability to freeze and recover stolen assets.

As stablecoins play an increasingly vital role in the digital-asset landscape, the need for consumer protections has never been more pressing.

James specifically pointed out that major issuers like Tether and Circle have shown limited cooperation with law enforcement efforts, despite their technological capabilities.

Without stronger regulations, the risks associated with stablecoins may continue to escalate, putting consumers at a greater disadvantage.

The call for reform reflects growing concerns about the integrity and security of the cryptocurrency ecosystem.