Letitia James, New York State Attorney General, has proposed a program bill to the State’s Legislature to establish new guidelines for cryptocurrency firms, with the primary objective of safeguarding investors and consumers.
The proposed legislation, known as the CRPTO Act, mandates crypto firms to conduct independent auditing and financial statement disclosures. It also compels crypto platforms to compensate clients who have fallen victim to fraudulent activities.
Under the proposed guidelines, crypto exchanges will not be allowed to retain custody of client funds and crypto brokers are prohibited from using customer funds for lending or borrowing. Additionally, crypto exchanges’ owners will be prohibited from owning the companies traded on those exchanges. The bill also compels platforms to compensate clients who have been victims of fraudulent activities.
The legislation aims to protect vulnerable groups such as people of colour and those with lower incomes. The attorney claims these groups of people are often the focus of crypto companies’ marketing campaigns.
According to James, implementing these ‘commonsense’ regulations will enhance transparency and oversight within the industry and bolster their capacity to take action against individuals who fail to adhere to the law.
James stated:
“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.”
In February 2023, James filed a lawsuit against CoinEx, a cryptocurrency exchange, stating that the company falsely represented itself as an exchange by not registering as a securities and commodities broker-dealer in the state.
DeFi Planet reported that James filed the petition with the New York Supreme Court on February 22, alleging that CoinEx engaged in continual fraudulent activities and violated the Martin Act, which is among the strictest anti-fraud and securities laws in the United States. She also emphasized that her office is working to prevent CoinEx from operating in New York and will continue to protect the public from the risks associated with the cryptocurrency industry.
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