Under a bill proposed by Attorney General Letitia James on Friday, the New York Financial Services Authority would have stronger powers to regulate digital assets, and exchanges could issue refunds to customers if they were victims of fraud. You need to do.
“We are proposing common-sense measures to protect investors and end the fraud and dysfunction that characterize cryptocurrencies,” James said.
New York law may directly oppose some of the major trends of cryptocurrency companies offering various activities such as trading platforms, custody and brokerage services. That all-in-one approach would be considered an illegal conflict of interest under the Attorney General’s proposal. The law also seeks to prohibit marketplaces from holding customer funds.
In recent months, James has taken action involving crypto firms Celsius, Kucoin, and Nexo, declaring that many crypto tokens are commodities or securities, despite considerable gray areas within existing law. James said the bill would also give her additional enforcement powers. tweeted on fridayWith no federal oversight of cryptocurrencies, New York is the de facto leader in U.S. regulation of the cryptocurrency industry, and while other states, including California and Illinois, are also trying to follow this approach, there is still Regulations have not been established.
The proposed law targets a range of stakeholders, from crypto issuers and exchange platforms to digital asset influencers, all of which must follow detailed disclosure requirements. Investors will be provided with details of risks and conflicts of interest, and crypto companies will no longer be able to borrow or lend their customers’ assets, James tweeted.
“This measure enforces violations of the law, issues subpoenas, imposes civil penalties of $10,000 per violation per individual or $100,000 per violation per corporation, and provides compensatory, damages, and penalties. Collecting, fraud and illegality,” said a press statement on Friday.
While state cryptocurrency activity is regulated by the New York Department of Financial Services (NYDFS), the controversial “BitLicense” overseer, the support James’ bill received from several members of the state legislature , suggesting that regulators may not have had. Sufficient authority to supervise the sector.
“New York Attorney General Letitia James has taken this step to protect New Yorkers from financial harm by establishing a comprehensive regulatory framework for the opaque cryptocurrency market,” Senator Kevin Parker said in a press conference. We applaud the timely introduction of the law.” State legislators representing Westchester County called the legislation “groundbreaking”.
“The lack of transparency that plagues the cryptocurrency industry is doing immeasurable harm to countless investors, especially low-income New Yorkers and people of color who bear a disproportionate share of the losses.” New York City Comptroller Brad Lander said.
A spokesperson for NYDFS said in a CoinDesk statement that the regulator is currently the “only sane regulator” in the U.S. with powers specific to cryptocurrencies and that “consumers and markets are protected and New York continues to Ensuring it is safe is a priority for DFS.” A global financial center. ”
“Recent DFS guidance sets out clear expectations regarding the use of blockchain analytics technology, the issuance of USD-backed stablecoins, banks engaging in crypto-asset activities, and consumer protection in the light of bankruptcies.” said a spokesperson. “Earlier this year, the ministry was the first regulator to deal with Binance, ordering Paxos to stop issuing Paxos-issued BUSD, mitigating the risk before consumers are harmed. As a result, the platform is vulnerable to serious criminal activities such as money laundering, activity related to child sexual abuse material, and potential drug trafficking.”
In March, James’ lawsuit against KuCoin alleges that tokens containing Ether (ETH) constitute securities to be registered with her office, and a lawsuit against CoinEx alleges that the LUNA token is related to the now-defunct stablecoin terraUSD. made a similar assertion about
Earlier this week, Celsius founder Alex Mashinski denied James’ claims that he misled investors about crypto lenders before filing for bankruptcy last year, with a statement James made to investors. He said he was picky.
James’ bill would codify the NYDFS’ authority to license and oversee crypto brokers, marketplaces, investment advisors and issuers before conducting business in the state.
Andrew Hinkes, a partner at law firm K&L Gates, said the bill would “destined to failBecause I misunderstood the code. Hinks said the rules cannot be applied to decentralized organizations, and there is no market for audits and insurance like James is proposing.
For this bill to become state law, it must be passed by the state legislature.
UPDATE (May 5, 2023 14:00 UTC): Correct the headline and add details from James’ tweet.
UPDATE (2023-05-05 14:10 UTC): Add a quote from Andrew Hinkes.
UPDATE (May 5, 2023 16:20 UTC): Update sourcing and add details from invoices and press statements.
Update (May 5, 2023 21:50 UTC): Add statements from NYDFS.