With New Legislation, New York Might Compel Cryptocurrency Companies to Reimburse Victims of Fraud

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Last Updated on May 7, 2023 by Bitfinsider

On Friday, New York Attorney General Letitia James upped her office’s war on the cryptocurrency business by proposing legislation that would require corporations to refund clients who have been victims of fraud.

“My office is introducing nation-leading legislation to tighten regulations on the cryptocurrency industry,” James tweeted. “For far too long, fraud in the cryptocurrency industry has caused investors to lose hundreds of billions of dollars, disproportionately affecting low-income investors and people of color.”

The new law would be James’ office’s second attempt to tighten its regulation of cryptocurrency enterprises. She sued CoinEx and KuCoin, as well as former Celsius CEO Alex Mashinsky, earlier this year, while the attorney general also issued a call for crypto whistleblowers last summer.

With its BitLicense, which is supervised by New York’s Department of Financial Services, the state already has one of the most stringent regulatory frameworks for crypto firms in the United States.

“We’re proposing commonsense measures to protect investors while also putting an end to the fraud and dysfunction that have become hallmarks of cryptocurrency,” James added. “Banks and other financial services are subject to regulation.” The bitcoin industry should be as well.”

The bill, as proposed by the attorney general, would oblige cryptocurrency companies to repay victims of fraud in the same way that banks do. It would also empower the attorney general’s office the authority to impose stricter industry restrictions and “force” independent and public auditing of crypto businesses.

The bill would also eliminate conflicts of interest and strengthen investor protection. It would “prevent people who create crypto assets from also owning crypto platforms” and would prohibit crypto enterprises from borrowing or lending investor assets.

According to James, investors would also receive risk and conflict of interest information on crypto firms.

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