New York is imposing stricter regulations on cryptocurrency.
New York’s attorney general (AG) Letitia A. James has announced a new bill aimed at regulating cryptocurrency market. This bill is one of the strongest pieces of legislation to date target toward giving oversight and monitoring the activity of an industry that has been at the forefront of numerous crimes and fraud-related activities.
The bill seeks to establish a clear regulatory framework for cryptocurrencies, requiring exchanges and related entities to register with the Financial Crimes Enforcement Network (FinCEN). According to AG James, “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. New York investors should have the peace of mind that there are safeguards in place to protect them and their money. All investments are regulated to account for every penny of investors’ money – cryptocurrency should be no exception.”
Since its rise to fame as a financial entity, cryptocurrency has been used in a number of high-profile fraud activities, many of which have been invested and dismantled by federal agencies. Popular among them is the FTX collapse where owner Samuel Bankman-Fried, the founder and former CEO of the cryptocurrency market exchange FTX, was said to have played a role leading to the loss of millions of dollars for crypto investors across the globe.
The bill, titled “Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act,” stipulates a number of provisions that would make cryptocurrency transactions more transparent, protect investors against fraud schemes, and remove any conflict of interest.
Cryptocurrency enthusiasts are often oblivious of the financial standings of cryptocurrency companies and as such are not aware of the risk of associating with them. The new bill seeks to ensure transparency by making sure companies:
- Make independent audits of financial standing and publish them.
- Provide robust information to users on risks and other conflict-of-interest disclosures.
- To ensure cryptocurrency promoters report and register their interest in crypto asset classes they promote.
Many companies had previously operated without proper registration and licensing using misleading information to deceive unsuspecting victims in fraud schemes.
Another key provision of the bill is aimed at bolstering investor protection by:
- Making sure cryptocurrency companies make provisions to reimburse customers who are victims of fraud.
- Banning the designation “stable coin” for an asset except when they are backed 1:1 with the U.S. dollar or a high-quality liquid asset.
The bill also requires cryptocurrency exchanges to implement strict Know Your Customer (KYC) procedures, including government-issued identification and personal information verification. This would help to prevent fraudulent activity and provide law enforcement with information to investigate and prosecute cryptocurrency related crimes.
The bill is an important step forward in targeting crypto crime and fraud in the United States. Many agree that the bill’s passage would be a major victory for consumers, investors, and law enforcement agencies. According to state senator James Sanders Jr., “As the cryptocurrency industry grows and captures the interest of investors across the state, it is imperative that our constituents are appropriately safeguarded against the threats at hand.”