New York’s attorney general, Letitia James, unveiled a comprehensive bill on Friday aimed at putting an end to rampant fraud and dysfunction within the cryptocurrency industry. This move is expected to draw national attention to the multi-billion dollar crypto market, which has so far operated with minimal federal oversight, leading to significant financial losses for consumers each year. New York, known for its proactive approach to cryptocurrency regulations, has taken the lead in shaping the industry’s legal framework.
The proposed bill, named the Crypto Regulation, Protection, Transparency, and Oversight Act, stands out as one of the most robust attempts to regulate cryptocurrency nationwide. Attorney General James emphasized the urgent need to establish law and order in this industry, highlighting the necessity of safeguards to protect investors and their assets. She stressed that just like any other investment, cryptocurrency should be subject to stringent regulations, ensuring the utmost transparency and accountability.
Cryptocurrency fraud has emerged as a growing concern within the realm of white-collar crime, both in the United States and globally. State and federal prosecutors have increasingly focused their attention on addressing fraudulent activities related to cryptocurrencies. Notably, a founder of a Las Vegas-based cryptocurrency and virtual payment company was recently sentenced to over eight years in prison for defrauding numerous investors out of approximately $7.5 million. In another case, the founder and former CEO of cryptocurrency exchange FTX faced federal charges, accused of intentionally deceiving customers and orchestrating the company’s multibillion-dollar collapse.
The proposed legislation in New York introduces innovative approaches to combat the crypto fraud problem. If the bill is enacted, crypto exchanges may be required to reimburse victims of fraud. The lack of robust regulations in this multi-billion dollar industry has made it susceptible to market volatility and has facilitated criminal activities and fraud. Attorney General James believes her bill will enhance transparency, eliminate conflicts of interest, and enforce common-sense measures to safeguard investors, aligning with the regulatory standards applied to other financial services.
To achieve these objectives, the bill mandates the following key provisions:
- Mandatory independent auditing and publication of audited financial statements for companies operating in the cryptocurrency space.
- Provision of comprehensive information to investors about issuers, including risk disclosures and conflict-of-interest declarations.
- Establishment and publication of listing standards for cryptocurrency marketplaces.
- Registration and reporting requirements for cryptocurrency promoters, detailing their interests in the assets they endorse.
Attorney General James has previously taken legal action against cryptocurrency firms, such as KuCoin, for operating without proper registration in New York. In January, she also sued Celsius founder Alex Mashinsky, alleging that misleading information led to substantial investor losses. The bill’s measures have received support from New York Assembly member Michaelle Solages, who emphasizes the importance of protecting communities of color, as they are increasingly drawn to crypto investments. Solages believes that cracking down on conflicts of interest, enhancing transparency, and enforcing robust cybersecurity requirements will level the playing field for crypto firms.
The need for strict oversight has gained traction among lawmakers. New York City Council Member Jennifer Gutiérrez, who conducted the first-ever oversight hearing on cryptocurrency and blockchain earlier this year, highlights the urgent requirement for regulation in this rapidly expanding industry. Gutiérrez emphasizes that transparency and proper oversight are essential to prevent financial exploitation of citizens.
As New York sets the stage for more comprehensive cryptocurrency regulations, the proposed bill aims to bring order and integrity to the industry while protecting investors from fraudulent practices.
