CRPTO law cracks down on CRYPTO | Pietragallo Gordon Alfano Bosick & Raspanti, LLP

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Regulators have been slow to impose cryptocurrency regulatory schemes despite multi-billion dollar thefts and losses. This lack of regulation could be coming to an end… and quickly, with the world’s financial capital at the forefront.

On Friday, May 5, 2023, New York Attorney General Letitia James proposed the Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act. If passed, the comprehensive CRPTO law will lay the groundwork for nationwide state and federal regulation.

The aim of the legislation is to protect customers and investors of digital assets against fraud, eliminate conflicts of interest and increase transparency. The law would amend the general commercial law relating to digital assets, the Financial Services Act regarding oversight by the Department of Financial Services to include brokers, advisers, issuers and marketplaces in digital assets, as well as legislation tax and reporting requirements.

With great responsibility comes great responsibility. The bill includes a long list of definitions and obligations that could effectively increase the number of potentially liable parties, including “digital asset influencers.” Digital asset influencers, such as brokers, advisers, issuers, and marketplaces, will be required to disclose ownership interests, file detailed registration statements, and comply with securities and securities laws. banks; Beware of Instagrammers and TikTok-ers.

The Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SIPC) have repeatedly stated that they do not cover crypto exchanges or cryptocurrencies; invest at your own risk. New York’s CRPTO law fills this gap. Cryptocurrency platforms and marketplaces would now be responsible for reimbursing victims of fraud. The CRPTO Act also provides for severe civil penalties, including fines ranging from $10,000 to $100,000 per violation. Additionally, any violations would also violate banking laws, potentially exposing individuals and platforms to greater liability, and violators to harsher penalties.

The proposed CRPTO Act could be the model framework that states and the federal government have been waiting for.

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