New York State Attorney General Letitia James has proposed a groundbreaking set of regulations on the cryptocurrency industry that aims to be the strongest and most comprehensive in the United States. The new legislation, officially called the Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act, seeks to increase transparency and eliminate conflicts of interest in the multi-billion dollar industry.
The proposed act is a response to rampant fraud and dysfunction that has become the hallmarks of cryptocurrency as a result of the lack of regulation in the sector. The new regulations would enforce commonsense measures that protect investors, similar to regulations imposed upon other financial services.
Among the measures is the introduction of independent public audits of cryptocurrency exchanges and the prevention of individuals from owning the same companies, such as brokerages and tokens, to avoid conflicts of interest. Crypto platforms will also have to take on similar responsibilities to banks under the federal Electronic Fund Transfer Act, by reimbursing customers who become victims of fraud. The bill would likewise strengthen the New York State Department of Financial Services’ (DFS) regulatory authority of digital assets.
The proposed CRPTO Act would bolster investor protections by enacting and codifying “know-your-customer” (KYC) provisions and prohibiting 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.
The bill would grant the Attorney General a remit to enforce the provisions of the law, issue subpoenas, impose civil penalties, and shut down businesses engaged in fraud and illegality. The DFS would have the authority to license digital asset brokers and marketplaces, investment advisors, and issuers before engaging in business in New York and would oversee the digital asset licensing regime.
Speaking on the proposed legislation, Attorney General James said, "these commonsense regulations will bring more transparency and oversight to the industry and strengthen our ability to crack down on those that don’t pay respect to the law." The proposed CRPTO legislation is indeed a landmark and will herald an era of law and order in a sector that has been plagued by fraud and mismanagement.
