Days after the Justice Department (DOJ) disbanded the National Cryptocurrency Enforcement Team, New York Attorney General Letitia James (D) wrote to congressional leaders on Thursday, urging them to tighten regulations over cryptocurrency.
Without safeguards James contended, digital assets might threaten national security if people anonymously fund criminal activities and hostile regimes, threaten investors with price manipulation in manipulated markets, and erode the dominance of the U.S. dollar.
Because of its opaque ownership structures and decentralized control, a large portion of the cryptocurrency market is appealing to adversarial state actors like North Korea, China, Russia, Venezuela, and Iran, terrorist organizations like Hamas and [ISIS], and international drug and crime cartels as a means of financing illicit activities, James wrote.
As the third-largest Bitcoin holder, North Korea has stolen almost $6 billion in cryptocurrency to finance its nuclear program, according to the New York attorney general, who has joined a number of cases against the Trump administration.
The letter, which was sent earlier this week to Senate Majority Leader John Thune (R-S.D.), Senate Minority Leader Chuck Schumer (D-N.Y.), House Speaker Mike Johnson (R-La.), and House Minority Leader Hakeem Jeffries (D-N.Y.), listed victims of cryptocurrency fraud and emphasized bitcoin as an ever-present rival to the U.S. dollar.
In New York, cryptocurrency fraud has had a significant effect, James wrote. Approximately 26,000 residents of New York made deposits on the Celsius trading platform and lost $440 million.
In December 2024, its CEO and creator entered guilty pleas to two federal criminal counts, and she said her agency is still suing him for the harm he inflicted.
DOJ officials announced on Monday that they would focus on prosecuting those who exploit investors in digital assets or those who use digital assets for criminal activities like terrorism, drug and human trafficking, organized crime, hacking, and financing cartels and gangs, rather than overseeing cryptocurrency enforcement.
Since returning to the White House, President Trump has set a new direction for cryptocurrency investors by holding the first-ever White House crypto conference and asking a number of prominent traders to speak. Along with establishing a “digital asset stockpile,” he also established the first government reserve of bitcoin.
As he promoted deregulation at the Digital Assets Summit, the president stated, “My administration is also working to end the federal bureaucracy’s war on crypto, which was really going on pretty wildly during Biden, until the election came about.”
Onshore reliable coin backing might allay some worries, according to James, who advocated for more regulation.
She wrote to the congressional leaders that the United States should mandate that stablecoins be fully backed by the U.S. dollar or treasuries on a one-to-one basis, issued by U.S.-based firms, and subject to federal and/or state inspection and regulation under U.S. laws.
Those dollars and treasuries ought to be placed in U.S.-supervised banks and other financial organizations. Investors who might not otherwise be aware that there are no real dollars behind the tokens are confused by so-called stablecoins that are not backed one-to-one by US dollars, she noted.
