"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."
James is set to release proposed legislation for the consideration of state lawmakers before the end of their legislative session next month. It is the latest pitch to the Legislature in a series of regulatory goals by the Brooklyn Democrat, who was reelected to a four-year term in November.
The legislation is intended to reduce potential conflicts of interest, require public reporting of financial statements and improve protections for investors in the crypto industry, according to James' office.
"James' cryptocurrency legislation sets the standard for all U.S. states and territories on how to regulate the fledgling cryptocurrency industry," said John Stark, a consultant who was the former chief of the federal Securities and Exchanges Commission's Office of Internet Enforcement.
The proposal would allow for both the attorney general's office and the state's Department of Financial Services to have broader authority in regulation of the crypto field. It could include granting the attorney general the ability to issue subpoenas, issue civil penalties of up to $10,000 per violation by individual or $100,000 by firm.
"As recent events demonstrate, unregulated actors will exploit consumers and investors in their quest for outsized profits, damaging the market for those who seek to comply with the rules," said Maria T. Vullo, former Superintendent of the state Department of Financial Services and former executive deputy attorney general for economic justice.
The "CRPTO Act," which seeks regulation, protection, transparency and oversight, is looking to ensure the crypto business provides similar information that those in the rest of the financial marketplace are required to provide. It could also prohibit brokers from borrowing or lending customer assets.
It would also seek to require crypto companies to public audited financial statements and provide investors with disclosures on potential conflicts of interest. It also would prevent companies from using "stablecoin" to describe their assets unless it is evenly backed by U.S. currency or other "high-quality liquid assets."
The crypto industry has been in the crosshairs of state policy in recent years. The fights typically pit crypto companies against environmental advocates. James has also recently found her office at odds with the industry and has filed multiple lawsuits against crypto companies.
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