NYAG’s latest proposal targets crypto firms engaging in fraud and more…
- NYAG is reportedly proposing a new law for governing crypto firms
- The bill also has a special clause for stablecoins and seeks to audit the financial reports of firms through independent auditors
New York Attorney General (NYAG) Letitia James is reportedly set to bring a wave of reform in regulating crypto entities. The NYAG will propose a new crypto bill dubbed the ‘Crypto Regulation, Protection, Transparency, and Oversight Act’ aka CRPTO.
The bill will be introduced in the New York State Senate in order to be considered for the 2023 legislative session, which will adjourn on June 8.
Notably, the bill will give the state regulator greater control over firms present in the crypto market, according to a report by Wall Street Journal. The bill aims to empower the NYAG to shut down crypto businesses alleged of fraud and other illegal activities. And, companies will have to refund customers who are victims of fraud
Some new crypto rules on the way?
The said proposal has a clause dedicated to stablecoins. If passed, the bill would ban the use of the term “stablecoins” for those coins that do not maintain 1:1 backing against the dollar.
Notably, talks about introducing regulation for stablecoins have been circulating in the US legislative branch. A draft bill introduced by Republicans in the House Financial Services Committee wants to introduce a governing party for stablecoin issuers, be it federal or state registered.
Additionally, the proposal wants to issue subpoenas and impose penalties on individuals and businesses violating the law. This could range from $10,000 per violation for an individual to $100,000 per violation for a crypto entity.
Interestingly, the bill also seeks to eliminate the conflict of interest in the crypto market. Furthermore, the proposal wants to stop a token issuer from creating a marketplace for the token, where it could be traded.
It would also force companies to present an audit report of their financial statements, conducted by an independent firm. This is a rule currently followed by all public companies in the United States. And, the report is submitted to the United States Securities and Exchanges Commission (SEC) by the auditor.
NYAG’s past actions on crypto firms
Moreover, reports of a new bill come days after the New York Attorney General labeled Ether [ETH] as a security. The classification of the crypto asset’s class was made in a lawsuit against Kucoin, a crypto exchange. The NYAG had taken action against Kucoin for violating the Martin Act in three ways.
And, given that the exchange had listed Ether, the AG claims that it had also committed securities violations. As per the state regulator, ETH satisfies all four conditions of the Howey Test, thereby falling under the securities category.