Attorney General Letitia James's Friday bill would make New York the first state to comprehensively regulate bitcoin.
In a press release, James said the Crypto Regulation, Protection, Transparency, and Oversight Act would "bring law and order" to the market by giving the NYDFS unprecedented jurisdiction to govern cryptocurrency assets and exchanges.
“Millions of investors have lost hundreds of billions in the value of their cryptocurrency investments because of rampant fraud, including market manipulation, hacking, and opaque business practices,” the announcement added.
The law would compel cryptocurrency platforms to be more transparent, prohibit conflicts of interest, and regulate the industry like other financial institutions. It would require third-party, public audits of cryptocurrency platforms and bar ownership of both platforms and tokens.
Like banks under the Electronic Fund Transfer Act, cryptocurrency exchanges would have to repay customers for fraud.
The Democrat-led House and Senate and Gov. Kathy Hochul must adopt and sign the bill before the legislative term ends in 2024.
In the lack of comprehensive rules from Congress, federal agencies like the SEC and CFTC have discussed how to govern the cryptocurrency business.
James's legal proceedings against "rampant fraud and dysfunction" in the bitcoin market led to the New York legislation. Her agency sued CoinEx in February and KuCoin in March for failing to register as a securities and commodities broker.
“New York investors should have the peace of mind that there are safeguards in place to protect them and their money,” James said in the release. "All investments are regulated to account for every penny of investors’ money—cryptocurrency should be no exception."
NYDFS licenses and inspects crypto businesses. Coinbase settled with the agency for $100 million in January over Bank Secrecy Act/anti-money laundering violations.
By fLEXI tEAM