New York State Attorney General Letitia James has put forth a proposal for landmark legislation to regulate the cryptocurrency industry. This proposal aims to provide protection for investors, consumers, and the broader economy. The proposed bill, titled “Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act,” is considered the strongest and most comprehensive set of regulations on cryptocurrency in the United States.
Increased Transparency and Elimination of Conflicts of Interest
The proposed legislation includes measures to increase transparency and eliminate conflicts of interest in the industry. This includes the requirement for independent public audits of cryptocurrency exchanges and preventing individuals from owning the same companies, such as brokerages and tokens, to stop conflicts of interest. Cryptocurrency platforms would also have responsibilities to customers similar to banks under the federal Electronic Fund Transfer Act by requiring platforms to reimburse customers who are the victims of fraud.
Bolstered Investor Protections
The proposed bill would also strengthen investor protections by enacting and codifying “know-your-customer” (KYC) provisions. It would ban the use of the term “stablecoin” to describe or market digital assets unless they are backed 1:1 with U.S. currency or high-quality liquid assets as defined in federal regulations.
Enforcement and Penalties
The proposed legislation would grant the Attorney General jurisdiction to enforce any violation of the law, issue subpoenas, impose civil penalties of $10,000 per violation per individual or $100,000 per violation per firm, collect restitution, damages, and penalties, and shut down businesses engaging in fraud and illegality. It would also codify New York State Department of Financial Services’ (DFS) authority to license digital asset brokers, marketplaces, investment advisors, and issuers prior to engaging in business in New York and allow DFS to oversee the digital asset licensing regime.
The Attorney General believes that rampant fraud and dysfunction have become the hallmarks of cryptocurrency and it is time to bring law and order to the multi-billion-dollar industry. These commonsense regulations will bring more transparency and oversight to the industry and strengthen the government’s ability to crack down on those that don’t respect the law.