State of New York Attorney General Letitia James escalated her office's crackdown on the crypto industry on Friday with proposed legislation that would force companies to refund customers who are victims of fraud.
"My office is introducing nation-leading legislation to tighten regulations on the cryptocurrency industry,” James said on Twitter. “For too long, fraud in the cryptocurrency industry has caused investors to lose hundreds of billions, with low-income investors and people of color suffering the most.”
The new bill would be the latest effort by James’ office to increase its oversight of crypto firms. She sued crypto exchanges CoinEx and KuCoin earlier this year, along with former Celsius CEO Alex Mashinsky, and the attorney general also put out a call for crypto whistleblowers last summer.
The state already has one of the toughest regulatory regimes for crypto companies in the U.S. with its BitLicense that's overseen by New York's Department of Financial Services, or NYDFS.
“We're proposing commonsense measures to protect investors and end the fraud and dysfunction that have become the hallmarks of cryptocurrency,” James said. "Banks and other financial services are regulated. The cryptocurrency industry must be too."
New York state lawmakers comment on proposal
A group of state lawmakers praised the bill in a press release, but it wasn't clear who might officially sponsor the legislation. State senators and assembly members mentioned in the statement, all Democrats, include Kevin Thomas, Cordell Cleare, Kevin Parker, Kristen Gonzalez, James Sanders Jr., Steve Otis, Michaelle Solages, Inez E. Dickens, Pamela J. Hunter, Alex Bores, Rebecca Seawright and Anna Kelles.
"I believe the Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act as proposed by the New York State Office of the Attorney General (OAG) in collaboration with the New York Department of Financial Services (DFS) will prove to be beneficial for our communities as it will shield even the most vulnerable investors from financial exploitation,” Sen. James Sanders Jr., the Chairman of the Committee on Banks, said in the statement.
The attorney general's office did not immediately respond to a request for comment. The program bill will be submitted to the State Senate and Assembly "for their consideration during the 2023 legislative session," the press release said.
New York AG's crypto bill would stop firms from borrowing or lending investor assets
The bill, as proposed by the attorney general, would require crypto companies to refund customers who are victims of fraud the way banks do. It would also give the attorney general’s office power to enforce tighter regulations for the industry and “force” independent and public auditing of crypto companies.
The legislation would also address conflicts of interest and and bolster investor protection. It would “prevent people who create crypto assets from also owning crypto platforms” and stop crypto firms from borrowing or lending investor assets.
Investors would also receive risk and conflict of interest information about crypto companies, James said.
“My office has taken action to stop cryptocurrency companies from operating illegally,” she said. “Our bill will continue New York’s legacy as a top financial leader to protect investors and our economy.”
Updates with statement from Attorney General's office starting in sixth paragraph.
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