NY Attorney General Pushes for National Crypto Regulation

New York Attorney General Letitia James has called on the U.S. Congress to enact comprehensive federal legislation governing cryptocurrencies, citing urgent concerns about fraud, criminal abuse, and market instability. In an April 10 letter to congressional leaders, James outlined the need for national rules that would protect retail investors, restrict questionable crypto practices, and solidify the sector’s market integrity.

Key Takeaways

1. Fraud and Financial Risks
   • According to James, 10% of all financial fraud incidents involve cryptocurrencies, representing 50% of the total dollar losses.
   • The NYAG estimates $12 billion in crypto-related fraud losses in 2024 alone.
   • She argues stricter federal oversight would curb these losses and enhance investor protections.
2. Market Manipulation Concerns
   • James warns about price manipulation and opaque business practices in unregulated crypto markets.
   • She points out that anonymous or pseudonymous digital assets facilitate criminal operations and sometimes finance adversarial regimes.
3. Stablecoin Regulation
   • The letter proposes requiring stablecoin issuers to be U.S.-based and fully backed by U.S. dollars or treasuries.
   • Issuers and intermediaries would need to register with federal regulators and adhere to compliance standards, including AML protocols.
4. Exclusion from Retirement Accounts
   • One of James’ recommendations is banning digital assets from inclusion in tax-advantaged retirement portfolios, such as 401(k)s or IRAs.
   • She also suggests trading platforms must meet anti-money laundering (AML) standards, offering a more transparent environment for investors.
5. Improved Transparency and Accountability
   • The letter calls for uniform disclosure requirements, conflict-of-interest protections, and stricter oversight of intermediaries.
   • Federal laws would close regulatory gaps exploited by fraudulent actors, preventing them from hopping between jurisdictions.

Why It Matters

James’ plea arrives amid a broader federal shift in crypto enforcement, including the U.S. Department of Justice restructuring fraud initiatives targeting digital assets. The NYAG stresses that state-level authorities alone cannot handle the growing complexities of crypto markets. She contends that consistent national regulations will instill confidence, guard consumers, and rein in potential abuses in the rapidly evolving digital asset sector.