- The New York Attorney General recently outlined her plans to regulate crypto in the state
- Letitia James outlined plans last Friday that would force crypto entities to operate more in line with traditional finance firms
- James is taking the lead after the likes of the SEC have failed to do so
New York Attorney General Letitia James recently announced landmark legislation to tighten regulations on the cryptocurrency industry, taking the lead over the various regulatory bodies headquartered in the state. Seemingly fed up with the intransigence of the likes of the Securities and Exchange Commission (SEC) in actively regulating the crypto space, James has taken it upon herself to “protect investors, consumers, and the broader economy” while not running crypto entities out of town. New York has been famously hot on crypto regulation over the years, and James’ bill would continue this trend of tough regulation, although it isn’t clear how the new bill would work with the existing New York BitLicense.
James Taking Matters Into Her Own Hands
James is no stranger to the crypto space, having presided over the years-long Ifinex/Tether dispute which ended in a settlement and has handled many crypto cases since, and it seems that this experience has deepened her desire to achieve more transparency as a result. The announcement of the bill, called the Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act, stated that the space “lacks robust regulations” which has allowed it to be used, among other things, “to hide and facilitate criminal conduct and fraud”. This, the announcement continued, would top the bill’s list of priorities:
Attorney General James’ program bill, which proposes the strongest and most comprehensive set of regulations on cryptocurrency in the nation, would increase transparency, eliminate conflicts of interest, and impose commonsense measures to protect investors, consistent with regulations imposed on other financial services.
New York has had a crypto regulations bill of sorts, the BitLicense, which has been in place since 2015, something that in itself has proved so onerous for companies to complete that they have simply left the state instead. Incredibly, the CRPTO Act doesn’t even mention the BitLicense, an omission that has the potential to cause a massive headache for crypto companies wanting to comply with both the existing and potentially new regulations.
James Wants More Transparency
James’ proposed legislation seeks to impose greater oversight on the crypto industry, mandating that crypto exchanges must undergo independent public audits of their financial records and reimburse defrauded customers. Moreover, the bill aims to curb conflicts of interest, such as instances where the same people create tokens and own the marketplaces where they are traded.
The legislation also requires crypto firms to implement know-your-customer procedures and prohibits the use of the term “stablecoin” to promote virtual currencies unless their value consistently maintains a one-to-one ratio with the US dollar.
The bill also aims to expand the Attorney General’s jurisdiction over crypto firms that operate within the state and formalize the New York State Department of Financial Services’ responsibility to license and regulate participants in the digital asset industry. James is asking for the authority to address violations of the law committed by crypto firms, issue subpoenas, and levy civil penalties of $10,000 for each individual violation or $100,000 for each crypto firm violation. Additionally, James is pursuing the ability to close down businesses that are allegedly involved in fraudulent or illegal activities.
Not Her First Rodeo
The CRPTO bill was described in the announcement as “the latest effort by Attorney General James to rein in the cryptocurrency industry.” Her efforts this year include filing a lawsuit against KuCoin for falsely presenting itself as a marketplace and failing to register as a securities and commodities broker, and similar action against CoinEx; heading a multistate coalition that recovered $24 million from Nexo for “illegal operations”; and a lawsuit against the former CEO of Celsius, Alex Mashinsky, for fraudulently deceiving investors and hiding the company’s poor financial situation from them.
