On Friday, New York Attorney General Letitia James proposed state legislation to tighten regulation of the cryptocurrency industry. She said that “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.” 

Her proposed legislation, the Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act, aims to stop conflicts of interest, require public reporting of financial statements, and bolster investor protections. Her office will submit the bill to the State Senate and Assembly for their consideration during the 2023 legislative session.

The legislation would "require independent public audits of cryptocurrency exchanges and prevent individuals from owning the same companies, such as brokerages and tokens, to stop conflicts of interest." It  would also require crypto platforms to reimburse customers who are the victims of fraud under the federal Electronic Fund Transfer Act. Further, the bill would  strengthen the regulatory authority of the New York State Department of Financial Services (DFS) over digital assets.

“Rampant fraud and dysfunction have become the hallmarks of cryptocurrency and it is time to bring law and order to the multi-billion-dollar industry,” James said in a statement. “New York 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. These commonsense regulations will bring more transparency and oversight to the industry and strengthen our ability to crack down on those that don’t pay respect to the law.”

James also pointed out that, “as cryptocurrency investments have been marketed directly to minority communities, the people most susceptible to fraud and losing significant funds due to financial collapses are disproportionately vulnerable and marginalized Americans.”