New cryptocurrency bill targets crypto crime and ‘rampant fraud’ across US
New York’s attorney general announced tougher measures Friday to “end the fraud and dysfunction that have become the hallmarks of cryptocurrency,” a move likely to bring more focus nationally on the multi-billion dollar crypto industry.
The bill is one of the toughest yet targeting fraud trends in an industry that has no real federal oversight, potentially costing consumers hundreds of millions each year. New York state and its Attorney General Letitia James have been at the forefront of modeling cryptocurrency regulations.
Other states such as California and Illinois have considered adopting similar laws. New York’s bill, called the Crypto Regulation, Protection, Transparency and Oversight Act, proposes one of the most comprehensive set of regulations on cryptocurrency in the nation.
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“It is time to bring law and order to the multi-billion-dollar industry,” James said Friday. “Investors should have the peace of mind that there are safeguards in place to protect them and their money. All investments are regulated to account for every penny of investors’ money − cryptocurrency should be no exception.”
Crypto fraud is a burgeoning white-collar crime problem in the U.S. and elsewhere, with cases increasingly becoming the focus for many state and federal prosecutors. In February, the founder of a Las Vegas-based cryptocurrency and virtual payment company who authorities say cheated dozens of investors out of about $7.5 million was sentenced to more than eight years in prison. Prosecutors say he used the proceeds to buy a house, cars, jewelry and other luxuries.
In December, federal prosecutors charged Samuel Bankman-Fried, the founder and former CEO of cryptocurrency exchange FTX, with a host of financial crimes, alleging he intentionally deceived customers and investors to enrich himself and others, while playing a central role in the company’s multibillion-dollar collapse.
New approaches to tackling the crypto problem
If the New York bill becomes law, crypto exchanges could be required to reimburse victims of fraud.
The multi-billion-dollar industry lacks robust regulations, making it prone to dramatic market fluctuations, and has been used to hide and facilitate criminal conduct and fraud, James contended in her bill proposal. She said her legislation would increase transparency, eliminate conflicts of interest, and impose common-sense measures to protect investors, consistent with regulations imposed on other financial services.
The bill aims to increase transparency in the industry by requiring companies to:
- Undergo mandatory independent auditing and publish audited financial statements;
- Provide investors with material information about issuers, including risks and conflict-of-interest disclosures;
- Require marketplaces to establish and publish listing standards; and
- Require cryptocurrency promoters to register and report their interest in any issuer whose crypto assets they promote.
James’ office has previously gone after crypto firms such as KuCoin, which she claimed operated without the proper registration in New York. She also sued Celsius founder Alex Mashinsky in January, alleging that investors lost billions due to misleading information.
“With communities of color increasingly drawn to investing in crypto, it’s essential that we introduce common-sense protections to prevent them from facing higher financial risks,” said New York Assembly member Michaelle Solages. “The proposed bill’s measures, including cracking down on conflicts of interest, enhancing transparency, and enforcing strict cybersecurity requirements, will create a level playing field for crypto firms.”
Many lawmakers say tough oversight is needed.
“When I held the first-ever oversight hearing on cryptocurrency and blockchain at the New York City Council this year, it was made clear by expert testimony that there is an urgent need for regulation of this fast-growing industry,” said New York City Council Member Jennifer Gutiérrez. She said “transparency and proper oversight” of cryptocurrency is needed to prevent citizens from being financially exploited.
This article originally appeared on USA TODAY: New cryptocurrency bill targets crypto crime and ‘rampant fraud’ across US
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