New York Attorney General Proposes Groundbreaking Crypto Law to Combat "Fraud and Dysfunction"
New York Attorney General Letitia James has put forth a proposal for what would be a landmark state law aimed at increasing regulation and oversight of the cryptocurrency industry. The proposed legislation, called the Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act, seeks to address what James calls "rampant fraud and dysfunction" in the sector.
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If adopted by state lawmakers, the CRPTO Act would introduce the most comprehensive set of cryptocurrency regulations in the United States. Key provisions include requiring independent public audits of crypto exchanges and prohibiting individuals from owning both brokerages and tokens in order to prevent conflicts of interest.
Moreover, the proposed legislation would mandate crypto platforms to reimburse customers who fall victim to fraud. It would also bolster the authority of the New York State Department of Financial Services to regulate digital assets. James asserts that millions of investors have lost significant investments due to fraudulent activities, such as market manipulation, hacking, and opaque business practices.
The push for stricter regulations follows recent legal action by James against crypto platforms CoinEx and KuCoin, as well as a settlement with Nexo Inc. and Nexo Capital Inc. The CRPTO Act would also ban crypto brokers and marketplaces from trading in their own accounts and forbid brokers from borrowing or lending customer assets.
The question of what constitutes a security in the realm of crypto assets is currently a subject of ongoing litigation and regulatory scrutiny. James has been vocal about her commitment to reigning in the cryptocurrency industry to protect consumers, particularly those who are most vulnerable. By implementing the CRPTO Act, New York investors could benefit from the peace of mind provided by stronger safeguards to protect their investments. Alternatively, New York could be making it clear that they are closed for business, creating opportunities for other jurisdictions (Wyoming, Florida, and Ohio amongst states who have taken steps to be “tech-friendly) will become even more pronounced.
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