New York Attorney General Proposes Expanded Powers to Regulate Cryptocurrency Industry

Wall Street Journal reported that New York Attorney General Letitia James is introducing a new bill, called the Crypto Regulation, Protection, Transparency and Oversight Act (CRPTO), which aims to give her office greater authority to regulate the cryptocurrency industry. The bill would grant the attorney general’s office broader enforcement power over crypto firms operating in the state, allowing it to issue subpoenas, impose civil penalties of up to $100,000 per violation for each crypto firm, and shut down businesses involved in alleged fraud and illegality.

The proposed legislation would also require crypto exchanges to undergo independent public audits and to reimburse defrauded customers. Additionally, it would prohibit conflicts of interest in the industry and require crypto firms to have know-your-customer procedures. The bill would also ban the use of the term "stablecoin" to market virtual currencies unless their values maintain a one-to-one ratio to the dollar. The bill will be submitted to the New York State Senate and Assembly for consideration during the 2023 legislative session.

The New York State Department of Financial Services presently issues “BitLicenses” to crypto firms to enable them to operate in the state and conducts inspections and enforcement actions on licensed companies. The NYDFS supervises more than 30 crypto firms and has previously imposed substantial fines on Coinbase and Robinhood for alleged violations of anti-money-laundering and cybersecurity regulations. NYDFS Superintendent Adrienne Harris has expressed her intention to use the state’s position as an industry leader to help shape national regulatory policy.

New legislation proposed by New York Attorney General Letitia James seeks to give her office expanded enforcement powers over crypto companies operating in the state, including the ability to impose civil penalties of $10,000 per violation for each individual or $100,000 per violation for each firm, and to shut down fraudulent or illegal businesses. The proposed bill, known as the Crypto Regulation, Protection, Transparency and Oversight Act, or CRPTO, would also mandate that crypto exchanges undergo independent public audits, require crypto firms to have know-your-customer procedures, ban the use of the term “stablecoin” for virtual currencies that do not maintain a one-to-one ratio to the dollar, and restrict conflicts of interest in the industry.

The legislation will be submitted to the New York State Senate and Assembly for consideration during the 2023 legislative session, which runs through June 8. The attorney general’s office has previously filed lawsuits against several crypto platforms, including KuCoin and CoinEx, for alleged regulatory violations.

Resources:

Wall Street Journal