A bill has been proposed to impose stricter rules on the crypto market.
To safeguard investors, consumers, and the economy, Letitia James, the attorney general of New York, has announced new regulations on the cryptocurrency business.
By eliminating conflicts of interest and enhancing investor protection measures, the bill seeks to increase transparency. These regulations would be consistent with those that control other financial services.
This includes efforts to prevent conflicts of interest by preventing people from owning the same businesses and public audits of crypto exchanges.
James stated that it was necessary to “bring law and order to the multi-billion dollar industry” since “rampant fraud and dysfunction have become the hallmarks of cryptocurrency.”
“Investors in New York should feel secure knowing that regulations are in place to protect them and their funds. Cryptocurrencies shouldn’t be an exception to the rule that all investments must be regulated to account for every dollar of investor money. These sensible rules will increase industry transparency and regulation, bolster our capacity to punish lawbreakers, and enhance the sector as a whole.”
The three primary goals of the bill are as follows
First, the following steps would be taken to prevent conflicts of interest:
- Prohibiting any participant from participating in more than one of those activities and banning common ownership of cryptocurrency issuers, marketplaces, brokers, and investment advisers;
- Prohibiting cryptocurrency brokers and exchanges from engaging in personal trade;
- Prohibiting the holding of consumer assets by marketplaces and investment advisors;
- Preventing brokers from taking out loans or borrowing customer assets;
- Preventing marketplaces from referring clients to financial services in exchange for payment.
In addition to demanding public reporting and financial accounts, the law will also strive to:
- Disclose certified account statements and submit them to mandated independent audits.
- Give investors important details about issuers, such as risk and conflict of interest declarations.
- Demand that markets create and distribute listing standards
- Promoters of cryptocurrencies should be required to declare and register their ownership in any issuer whose crypto assets they are promoting.
Additionally, the new regulations will seek to strengthen investor protection by:
- The adoption and codification of “know-your-customer” laws, which stipulate that brokers must be aware of key information about their clients, as well as a need for cryptocurrency brokers and marketplaces to only cooperate with companies that respect to the terms;
- Prohibiting the marketing or use of the name “stablecoin” for digital assets unless they are 1:1 backed by U.S. dollars or other high-quality liquid assets as specified by federal legislation;
- requiring platforms to compensate users who fall victim to fraudulent transfers of assets or unauthorized asset transfers.
In conjunction with legal infractions, the CRPTO Act would provide the attorney general the authority to issue subpoenas and levy fines. Additionally, the attorney general would have the power to shut down companies that commit fraud and criminal activity.
James filed a complaint against KuCoin in March alleging that it misrepresented itself as a marketplace and failed to register as a securities and commodities broker.