Proposed Bill by New York Attorney General Could Hold Crypto Exchanges Accountable for Fraud
New York Attorney General Letitia James has proposed a bill that could require cryptocurrency exchanges to reimburse users who have been victims of fraud. The bill aims to regulate the crypto industry by giving the New York Attorney General’s office more authority to enforce laws in the digital asset space. The proposed legislation, known as the Crypto Regulation, Protection, Transparency and Oversight Act (CRPTO), will be submitted to the state’s 2023 legislative session.
What CRPTO Would Do
The CRPTO bill would give New York officials enforcement power, enabling them to issue subpoenas, impose civil penalties for crypto firms violating state law, and shut down companies allegedly involved in fraud or illicit activities. It would also require exchanges to reimburse users who have fallen victim to fraud. Additionally, it would codify the term “stablecoin” to only apply to tokens that remain backed by 1:1 United States dollar reserves or “high-quality liquid assets.”
Why the Bill is Proposed
According to Letitia James, fraud in the cryptocurrency industry has caused investors to lose hundreds of billions, with low-income investors and people of color suffering the most. She believes that the cryptocurrency industry should be regulated just like banks and other financial services are.
Strengthening Authority
Currently, the New York State Department of Financial Services (NYDFS) has the authority to issue BitLicenses to crypto firms operating in the state and oversee many aspects of the digital asset space. The proposed bill would aim to strengthen that authority.
Past Actions Taken by James’ Office
Letitia James’ office has previously taken action against crypto firms, including KuCoin, alleging the company sold securities and commodities to residents without registering in New York. In January, the AG also filed a lawsuit against Celsius founder and former CEO Alex Mashinsky, claiming he made numerous “false and misleading statements” that led to investors losing billions.
What Happens Next?
If introduced, New York lawmakers will need to vote on the proposed bill. In 2022, the legislature passed a two-year moratorium on Bitcoin (BTC) mining in the state despite some crypto advocates suggesting lawmakers had spun a false narrative in marketing the legislation.
Conclusion
The proposed Crypto Regulation, Protection, Transparency and Oversight Act (CRPTO) by New York Attorney General Letitia James could have a significant impact on the cryptocurrency industry by regulating it more strictly. With this proposed legislation, exchanges may be held accountable for fraudulent activities, and users who are victims of fraud may receive compensation. However, it remains to be seen how the bill will fare in the legislature and whether it will become law.
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