New York attorney general seeks broader powers to regulate the crypto industry

The Office of the New York State Attorney General should receive broad powers to regulate the cryptocurrency industry. The proposal is contained in a bill from the office’s head, Letitia James.

Today, my office is introducing nation-leading legislation to tighten regulations on the cryptocurrency industry.

We’re proposing commonsense measures to protect investors and end the fraud and dysfunction that have become the hallmarks of cryptocurrency.

— NY AG James (@NewYorkStateAG) May 5, 2023

“We are proposing sensible measures to protect investors and end the fraud and dysfunction that have become the hallmarks of cryptocurrency,” James wrote.

The document titled “Regulation, Protection, Transparency, and Oversight of Cryptocurrency Act” (CRPTO) will be introduced in the state Senate and Assembly during the 2023 legislative session, which runs through June 8, according to The Wall Street Journal.

The provisions would require cryptocurrency exchanges to conduct independent public audits and reimburse customers harmed by fraud. CRPTO aims to curb conflicts of interest in the industry and forbids the use of the term “stablecoin” for assets not pegged to the US dollar on a 1:1 basis.

In addition, the bill would vest the New York State Department of Financial Services (NYDFS) with licensing powers over participants in the industry.

Earlier the NYDFS began an investigation into the Bitcoin exchange Gemini over allegations concerning the safety of client assets. In February, the regulator turned its attention to the issuer Binance USD (BUSD), Paxos, and ordered the firm to stop issuing the stablecoin.

In the same month, the Department announced an update to monitoring tools for illicit activity involving digital assets among supervised entities.

In March, the New York State Office of the Attorney General filed a lawsuit against KuCoin. The cryptocurrency exchange was accused of violating securities laws by offering tokens without a license.

Earlier, NYDFS and the U.S. Securities and Exchange Commission opposed the purchase of Voyager Digital assets by Binance’s U.S. subsidiary. A similar position was taken by the U.S. Treasury.

Subsequently, authorities dropped their objections, but the exchange terminated the deal amid a “hostile and uncertain regulatory climate in the United States.”