New York State Attorney General Proposes Cryptocurrency Regulation, Protection, Transparency and Oversight (CRPTO) Act

On May 5, 2023, New York State Attorney General Letitia James announced legislation to regulate all aspects of the cryptocurrency industry. Entitled the Cryptocurrency Regulation, Protection, Transparency, and Oversight (CRPTO) Act, if enacted, New York City’s oversight of cryptocurrency companies operating in the Empire State will be strengthened by privacy and cybersecurity issues. will be greatly expanded, including

The bill includes a wide range of measures aimed at comprehensively regulating the entire cryptocurrency ecosystem. Subject to certain exceptions for tokens used in online gaming, sports betting, customer loyalty programs and other advantageous uses, “digital assets” is defined broadly under the bill to include cryptocurrencies, coins and tokens. It includes any “digital unit of any kind”, whether or not it is labeled as such. , virtual currency, or any other medium that can be used as a medium of exchange, a digitally stored form of value, or a unit of account. The bill also states that “digital assets include digital units with centralized repositories or custodians, digital units that are decentralized and without centralized repositories or custodians, or digital units created or acquired by computing or manufacturing operations.” shall be construed broadly to include the

Attorney General James’ bill contains a wide range of provisions that affect various parties trading digital assets, including issuers, brokers, investment advisors, marketplaces and even social media influencers. Among other things, the bill would impose extensive registration, disclosure, audit, and business conduct rules on these parties. For example, digital asset brokers would be required to maintain net capital in the same manner as securities broker-dealers, and digital asset intermediaries would be required to reimburse their customers for fraudulent and fraudulent transfers. Many common practices of cryptocurrency exchanges, such as cross-ownership of digital asset issuers, marketplaces, brokers and investment advisors, will also be outlawed altogether. Lending and Borrowing of Customer Assets. A specific trading strategy. Self-custody of digital assets. The bill would also restrict the use of the term “stablecoin” when describing or selling digital assets unless they meet narrow standards.

The measure would require all digital asset issuers, digital asset brokers, digital asset marketplaces, and digital asset investment advisors to have effective cybersecurity programs that meet the requirements of applicable state and federal data privacy and cybersecurity laws. must be created, implemented and maintained. The bill would also take the unusual step of verifying that digital asset software code is consistent with disclosures by issuers to purchasers and that it contains security features that comply with applicable state and federal laws. imposes obligations on digital asset marketplaces;

The bill also includes new enforcement powers and a new Attorney General’s Anti-Fraud Act. If passed, the bill would give the Attorney General even broader rule-making powers.

The prospects for passage of the bill in the New York legislature are unclear, but the Attorney General’s press release announcing the bill included favorable comments from dozens of politicians, legislators and consumer advocates. .

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