Good day everyone,
I hope you are all well and having an excellent week, welcome to CryptoGod-1’s blog on all things crypto. The New York Attorney General has recently proposed a bill aimed at regulating the cryptocurrency industry within the state, which I will look at in detail here.
New York Attorney General
The new proposed legislation by New York Attorney General Letitia James outlines that customers would be entitled to refunds, along with audits of cryptocurrency exchanges. Drastic moves for an industry which has been plagued with fraud exchanges, projects, and consumers being left out of pocket. The idea behind the bill is to reign in the industry, and the bill was announced by her office on Friday the 5th of May 2023.
Within the statement, James outlined:
“Rampant fraud and dysfunction have become the hallmarks of cryptocurrency and it is time to bring law and order to the multi-billion-dollar industry.”
Looking to be the strongest and most comprehensive set of regulations placed upon the cryptocurrency industry within the nation, James is looking to build upon the existing robust regulations within New York. Currently the BitLicense, a business license which permits regulated virtual currency activities, is just one of the ways the state is trying to cut down on bad actors within the space.
Back in March of 2023 James filed a lawsuit against KuCoin, the cryptocurrency exchange, after it apparently failed to register with the state. However, one of the more interesting things from that action was that James noted Ether as a security, something which even the SEC has been unwilling to do. It was also the first time a regulatory official in the US has referred to Ether as being a security.
The Bill
Within the bill, known as the Crypto Regulation, Protection, Transparency and Oversight (CRPTO) Act, which will be submitted to the State Senate and Assembly for consideration during the 2023 legislative session, the main aim is to remove the levels of conflict of interests. This is primarily between crypto brokers and marketplaces, ensuring they are unable to trade their own accounts and also blocking any brokers from borrowing or lending customer assets. Clearly much of this has stemmed from the previous disasters associated with crypto over the previous year, including the collapse of FTX and Alameda Research.
There are also proposals for any companies entering or practicing in the crypto space to undergo independent auditing, while also placing a requirement for published audited financial statements. Stablecoins are also addressed within the bill, as they a hot topic of concern and require regulation on how they are actually backed and maintained in a stable manner, as the level of stablecoins repegging had been disastrous for the space. This would be achieved by:
"Banning the use of the term “stablecoin” to describe or market digital assets unless they are backed 1:1 with U.S. currency or high-quality liquid assets as defined in federal regulations"
Another key aspect of the bill would see a reasonability placed upon cryptocurrency platforms, such as exchanges or lenders, to reimburse customers who are the victims of fraud or unauthorized asset transfers. This would work similar to that of banks, and be enforced under the federal Electronic Fund Transfer Act. As noted within the statement, the plans within the bill and the powers it would grant the authorities would be as follows:
"The bill would grant the Attorney General jurisdiction to enforce any violation of the law, issue subpoenas, impose civil penalties of $10,000 per violation per individual or $100,000 per violation per firm, collect restitution, damages, and penalties, and shut down businesses engaging in fraud and illegality."
In terms of federal level laws, lawmakers are currently working on bills which will look to regulate the cryptocurrency industry, and some of them are expected to be introduced in the coming months.
This is certainly an interesting and progressive step forward in terms of regulations. While of course it is not the perfect finished article as of yet, it is regulations aimed at placing responsibility and laws upon the exchanges more so than the consumers. The bill is looking at putting in place ways to ensure the authorities have the power to enforce the law against any exchanges or platforms which engage in bad practices while also aiming to safeguard consumers investments. I am sure there will be plenty of discussion and development with the bill before it could ever be passed or put into practice, but it is definitely a step in the right direction.
Have a great day.
Peace. CryptoGod-1.
** I first posted this story on Medium on the 7th of May 2023, which can be found here: https://medium.com/@1r3n9project/ny-attorney-general-proposes-bill-on-crypto-fc17098b951d?sk=245451c3d73cf1f740c07f64093d3e02 **
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