New York AG warns Congress of non-US stablecoin issuers like Tether amid legislation talks

New York State Attorney General Letitia James sent a letter to congressional leaders cautioning against embracing foreign issuers of stablecoins like Tether."The U.S. should require stablecoins to be backed by the U.S. dollar or treasuries on a one-to-one basis and be issued by companies that have an American presence and are regulated under U.S. laws and subject to federal and/or state oversight," James said in a letter dated April 8, and announced in a statement on Thursday. "Those dollars and treasuries should be deposited in banks and institutions under U.S. supervision."James' letter, addressed to leaders of the Senate and House, comes as Congress mulls stablecoin legislation that could impact not only reserve requirements but also how foreign issuers are treated. Currently, the world's largest stablecoin supplier, Tether, does not have a U.S. presence, and its USDT token is backed by a mix of assets that includes U.S. Treasury Bills, Bitcoin and precious metals.The attorney general urged Congress to include "onshoring stablecoins to protect the U.S. dollar and the treasuries market" in upcoming digital asset legislation."Tether holds at least $94.5 billion in U.S. treasury bills, equaling 55% of the average daily trading volume of treasury bills," James said. "Stablecoin redemptions, which can cascade during cryptocurrency market meltdowns, can spark run on the bank scenarios for the underlying cash and treasuries reserves, potentially necessitating sell-offs in the treasury markets."James also pointed out in her letter that Tether recently relocated its headquarters to El Salvador and that she previously accused the issuer of "misrepresenting its reserves" in 2021.Recently, Tether appeared to show increased interest in complying with U.S. regulators, with the issuer's CEO Paolo Ardoino saying the company is thinking of launching a new U.S.-based stablecoin aimed specifically at institutional clients. Tether's next closest rival, Circle, is based in the U.S. and holds its reserves more in line with James' suggested framework. Tether has also made other moves to demonstrate its desire to comply with regulators, including working on an audit conducted by a "Big Four" accounting firm and hiring a new chief financial officer.Bitcoin threatJames also cautioned against the widespread adoption of Bitcoin and its ability to undermine national interests."A strong dollar is in America’s national interest. It means there is demand for and confidence in U.S. institutions and the U.S. economy. America should defend the prime position of the U.S. dollar for global transactions—a position that Bitcoin, which can instantly transfer value globally, threatens," she said in her letter.James' letter was addressed to Senate Majority Leader John Thune, Senate Minority Leader Charles Schumer, Speaker of the House Mike Johnson and House Minority Leader Hakeem Jeffries.Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.© 2025 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.