[ad_1]
Although active in space for several years, state attorneys general have taken increasingly aggressive steps over the past year to regulate crypto-based products and services and prosecute those who abuse this innovation. otherwise exciting. In this article, we summarize the basics of crypto, as well as recent actions by state attorneys general regarding crypto-based products and services.
Crypto in brief
As a digital currency, cryptocurrency does not exist in any physical form, cannot be placed in a leather wallet like cash, and is not held in a bank with four walls and a safe. strong against the wicked. Built on blockchain technologies, the most popular cryptocurrencies use cryptography to manage and record transactions on decentralized and distributed ledgers.
Because they use decentralized and distributed ledgers, cryptocurrencies and cryptocurrency-based financial products are not tied to financial institutions or directly controlled by many laws and regulations that govern financial institutions. [1] – and this is a sensitive point for some regulators concerned that a lack of regulation has already facilitated all kinds of abuse.
Although not (yet) used for most financial transactions, the value of cryptocurrencies – and the potential for abuse that comes with it – has increased dramatically. In April 2021, the total market value of the various publicly available cryptocurrencies reached $ 2,000 billion, [2] and last month, the FTC noted that since October 2020, nearly 7,000 people have reported losses of more than $ 80 million in cryptocurrency-related scams. [3]
To address these growing concerns, a number of state and federal regulators have taken steps to regulate cryptocurrencies. But at least for the time being, it has resulted in a patchwork of state and federal laws, rather than a comprehensive and cohesive regulatory regime. As Treasury Secretary Janet Yellen noted last May, “While there are several agencies that arguably have some capacity to deal with [cryptocurrency] through regulation, I frankly don’t think we have a framework in the United States that is quite up to par. ” [4]
That said, state attorneys general are doing what they can – and are certainly paying attention to consumer protection concerns related to crypto-based products and services.
State action
Some states have taken steps to encourage innovation related to crypto. As late as May 2021, Nebraska Governor Pete Ricketts signed legislation creating a state banking charter for digital asset depositories and allowing existing state chartered banks in the state to ” open cryptocurrency banking divisions, which could drive growth in Nebraska for the crypto market. [5] Yet the most significant trend is aggressive enforcement activity involving crypto-related financial products and services.
For example, in September 2020, Massachusetts Attorney General Maura Healey sued Stripe, Inc. for improperly facilitating transactions by people participating in an Initial Coin Offering (ICO). [6] Attorney General Healey alleged that these individuals fraudulently sold PlexCoin, resulting in the fraudulent and unregistered offer and sale of cryptocurrency. [7] In addition to a payment of $ 120,000, Stripe agreed to improve its risk monitoring procedures, including improving duplicate control procedures for accounts with shared bank accounts, improving monitoring merchant websites, revising its procedures for handling law enforcement applications, and training employees in risk monitoring. . [8]
In February 2021, New York Attorney General Letitia James reached a settlement agreement with Tether, a cryptocurrency trading platform that claimed to offer a US dollar-backed “stablecoin”. [9] Attorney General James alleged that Tether made false statements about his cryptocurrency, which was not fully backed by US dollars. [10] In the settlement agreement, Tether agreed to pay $ 18.5 million in penalties, cease trading with New Yorkers, and provide more transparent information on support for its stablecoin. [11]
Also in February 2021, Attorney General James filed a lawsuit against Coinseed, Inc. and two of its senior executives. Attorney General James alleged that the Coinseed defendants illegally traded cryptocurrencies without registering as brokers and did not disclose certain fees associated with trading virtual currencies on behalf of their investors. [12] More recently, in May, Attorney General James filed a petition in the Coinseed lawsuit, asking the court for a temporary restraining order, a preliminary injunction and the appointment of a receiver to immediately prevent the Coinseed defendants from carrying out. other unauthorized transactions. [13]
And after?
We expect more regulatory oversight of crypto-based products and services. As their recent activity demonstrates, state attorneys general will remain at the forefront of this action.
We will continue to monitor crypto-related innovations, as well as crypto-related regulatory developments. If you have a crypto-related product or service, or if you’re just interested in how regulators respond to (and sometimes frustrate) innovation, stay tuned.
[1] For a more detailed understanding of cryptocurrency, see the article “What is cryptocurrency?” by Kate Ashford and Josh Schmidt. https://www.forbes.com/advisor/investing/what-is-cryptocurrency/.
[2] Noah Manskar, “Cryptocurrency Market Value Surpasses $ 2 Trillion For The First Time.” The New York Times (April 6, 2021), https://nypost.com/2021/04/06/cryptocurrency-market-value-tops-2-trillion-for-first-time/.
[3] “Cryptocurrency buzz is driving record investment scam losses.” Federal Trade Commission (May 17, 2021), https://www.ftc.gov/news-events/blogs/data-spotlight/2021/05/cryptocurrency-buzz-drives-record-investment-scam-losses.
[4] “Yellen says the United States does not have an adequate regulatory framework for crypto.” Bloomberg Tax (May 4, 2021), https://news.bloomberglaw.com/daily-tax-report/yellen-says-us-lacks-adequate-regulatory-framework-for-crypto?context=article-related.
[5] Jared Austin, “Cryptocurrency Will Be Regulated In Nebraska.” 1011 Now (May 26, 2021), https://www.1011now.com/2021/05/27/cryptocurrency-to-be-regulated-in-nebraska/.
[6] “The payment processor must pay $ 120,000 as part of the cryptocurrency program.” Office of Mass. Att’y General (September 18, 2020), https://www.mass.gov/news/payment-processor-to-pay-120000-in-connection-with-cryptocurrency-scheme.
[7] Identifier.
[8] Identifier.
[9] “Attorney General James Ends Virtual Currency Trading Platform Bitfinex’s Illegal Activities in NY” Office of NY Att’y General (February 23, 2021), https://ag.ny.gov/press-release/2021/attorney-general- james- ends-virtual-currency-trading-platform-bitfinexs-illegal.
[10] Identifier.
[11] Identifier.
[12] “Attorney General James is suing to shut down illegal cryptocurrency trading platform and virtual currency, seeks to recover fraudulent funds for thousands of investors.” Office of NY Att’y General (February 17, 2021), https://ag.ny.gov/press-release/2021/attorney-general-james-sues-shut-down-illegal-cryptocurrency-trading-platform -et .
[13] “Attorney General James is seeking a court order immediately ending the continued fraud by the illegal virtual currency trading platform.” Office of NY Att’y General (May 7, 2021), https://ag.ny.gov/press-release/2021/attorney-general-james-seeks-court-order-immediately-halting-continued-fraud.
[ad_2]
picture credit