New York State Attorney General (NYAG), Letitia James, is urging the state’s legislature to pass a law regulating the cryptocurrency sector that she claims will set the standard for the rest of the country regarding openness and investor protection.
In a May 5 press release, AG James unveiled legislation imposing stricter rules on the crypto sector to safeguard consumers, investors, and the traditional economy.
Known as the CRPTO Act, the legislation would oblige crypto firms to submit to independent auditing, publish financial statements, and mandate platforms to compensate clients who fall victim to fraud.
Proposal to curb runaway fraud
According to James, the crypto industry has been used to conceal and enable illegal activity and fraud since it lacks hard and fast rules, rendering it susceptible to bad actors and sudden market changes.
The New York AG said increasing transparency, removing conflicts of interest, and enacting commonsense investor protection measures are all part of her proposed program bill, which she believes is the most comprehensive and robust set of digital asset regulations in the United States.
Additionally, the bill would stop financial fraud and conflicts of interest that characterized the now-defunct FTX exchange. It would make it illegal for people to own crypto exchanges and companies conducting trades on those exchanges.
Furthermore, crypto brokers would not be permitted to lend or borrow from customers’ cash, and crypto exchanges would not be allowed to maintain custody of customers’ funds.
The proposal would give the state’s Department of Financial Services (NYDFS) and the attorney general’s office greater ability to regulate the cryptocurrency industry.
Per the proposal, the NYAG can be given the authority to issue subpoenas and impose civil fines of up to $10,000 per offense for an individual or $100,000 for an organization.
Scams, rug pulls on the rise
AG James’s bill comes in the wake of several reports of incidences of fraud in the crypto space. On May 4, an educational project funded by CultDAO called XIRTAM lost 2,000 ethereum (ETH) valued at about $3.5m to a suspected rug pull.
On the same day, the price of the WallStreetBets-linked meme coin, WSB Coin, dropped 85% after reports emerged that one of the project’s moderators had dumped more than $600,000 worth of the tokens in another rug pull.
While supporting James’s proposal, New York State Senator Kevin Thomas, who heads the Committee on Consumer Protection, said he expects it will ensure that consumers in the crypto sector and their investments are protected from such incidences in the future.