Attorney General Calls for Congress to Update Cryptocurrency Laws to Safeguard Investors

neral James recommends that congressional leaders strengthen the GENIUS Act by regulating the issuers of stablecoins in a similar manner to banks and offer insurance provided by the Federal Deposit Insurance Corporation (FDIC) on stablecoin deposits.

In her letter to congressional leaders, Attorney General James expressed concern about the lack of protection for investors in the cryptocurrency market. She emphasized the potential risks associated with unregulated cryptocurrency transactions, highlighting the dangers they pose to investors, the economy, and national security. Attorney General James stressed the importance of passing legislation that would enhance oversight of cryptocurrency to prevent fraud and criminal activity and safeguard the interests of the American public.

The passage of the GENIUS Act by the U.S. Senate raised questions about the adequacy of the regulatory framework surrounding stablecoins. Attorney General James pointed out that the GENIUS Act, along with the STABLE Act, lacked the necessary safeguards to protect Americans from the risks associated with stablecoin transactions. She underscored the anonymous nature of stablecoin transactions, which could potentially be exploited by criminal groups and terrorist organizations to engage in illicit activities that could undermine national security.

To address these concerns, Attorney General James recommended significant modifications to the GENIUS and STABLE Acts. She urged Congress to regulate stablecoin issuers as banks, implement stronger supervision and capital requirements, ensure investors’ ability to redeem stablecoins on demand, and protect deposits through FDIC insurance. Additionally, Attorney General James emphasized the importance of requiring issuers to use digital identity technology in stablecoin transactions to enhance national security, prevent scams, and deter market manipulation.

In advocating for regulatory changes, Attorney General James highlighted the need to support community banks and to resist efforts that could undermine the financial stability of these institutions. She emphasized the critical role of regulated financial institutions in providing financial services to rural America and underserved communities and warned against the potential impact of stablecoins on the financial access and stability of these communities.

Attorney General James also provided testimony to the U.S. House Financial Services Committee on the CLARITY Act, expressing concerns about its limitations in preventing fraud and protecting investors. She raised concerns about the risks posed by the anonymity of bad actors in the cryptocurrency market, the potential for market manipulation, and the importance of upholding state investor protection laws.

Overall, Attorney General James has been actively involved in efforts to protect investors and strengthen regulations on cryptocurrency. From freezing cryptocurrency linked to scammers targeting Russian-speaking New Yorkers to recovering funds from companies engaged in illegal activities, her work underscores the significance of comprehensive regulation in safeguarding the interests of investors and maintaining the integrity of the financial system.