New York Proposes "Landmark" Crypto Law For Strongest US Regulations

New York State Attorney General Letitia James has proposed “the strongest and most comprehensive set of cryptocurrency regulations in the United States.” The “Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act,” a proposed piece of legislation, seeks to safeguard consumers, investors, and the general economy while bringing law and order to the multibillion-dollar cryptocurrency industry.

The proposed measure intends to promote transparency, remove conflicts of interest, and provide adequate investor safeguards in conformity with current financial sector legislation. It would prohibit people from holding the same businesses, such as brokerages and tokens, and independent public audits of cryptocurrency exchanges would be necessary to remove conflicts of interest.

The proposal would also broaden the New York State Department of Financial Services (DFS) regulatory power over digital assets and increase investor safety by enacting and codifying “know-your-customer” (KYC) standards. Furthermore, according to federal law, the term “stablecoin” may not be used to describe or advertise digital assets that are not 1:1 backed by US money or other high-quality liquid assets.

Furthermore, under the federal Electronic Fund Transfer Act, bitcoin platforms would be obligated to perform consumer obligations comparable to banks, including paying out to clients who have been victims of fraud. The bill would give the Attorney General the authority to pursue any law violation, issue subpoenas, impose civil fines of $10,000 per violation for a person or $100,000 for a company, collect restitution, damages, and penalties, and shut down companies that commit fraud and unlawful activity.

According to the announcement, “the bill would also codify DFS' authority to license digital asset brokers, marketplaces, investment advisors, and issuers before doing business in New York, and would allow DFS to oversee the digital asset licensing regime.”

Attorney General James said that it was time to restore law and order to the Bitcoin business since widespread fraud and dysfunction had become its defining characteristics. She believes that this straightforward legislation will improve the sector's openness, oversight, and ability to penalize lawbreakers.

Many in the crypto community have praised the draft legislation as an essential step toward regulating the crypto sector without imposing an undue regulatory burden on firms. They argue that the KYC requirements and the prohibition on using the word “stablecoin” are too restrictive and may have unforeseen repercussions.

Despite these reservations, the proposed measure is seen to be a big step forward in the regulation of the cryptocurrency business in the United States. New York has previously put in place the “BitLicense,” a regulatory framework for enterprises that use digital currencies that was announced in 2015. BitLicense has been chastised for being excessively stringent, prompting a number of Bitcoin firms to leave the state. The proposed CRPTO Act, on the other hand, is considered a more sensible approach that aims to strike a balance between regulation and innovation.

The cryptocurrency business has risen substantially in recent years, with the market value of all cryptocurrencies over $2 trillion at the time of writing. However, the sector has been plagued by fraud, scams, and other illicit activity, prompting demands for further regulation.

Certain bitcoin sector players are anticipated to oppose the proposed regulation because they see it as an unreasonable interference in their company. The legislation's supporters argue that it is critical to safeguard consumers and investors against dishonest entrepreneurs.

If approved, the CRPTO Act would establish New York as a national leader in cryptocurrency regulation. Other states may follow suit, resulting in a more unified regulatory environment for cryptocurrencies throughout the nation.

Finally, the proposed CRPTO Act is an important step forward in the regulation of the cryptocurrency business in the United States. Despite probable pushback from some industry participants, it is seen as a critical step in protecting investors and customers against fraudulent activities. If enacted, the bill will identify New York as a pioneer in cryptocurrency regulation, perhaps providing a blueprint for other states to follow.

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