NY AG: ‘More Must Be Done’ to Regulate Crypto

New York Attorney General Letitia James wants Congress to do more to protect cryptocurrency investors.

James wrote a letter to congressional leadership Tuesday (April 8), saying lawmakers should mandate that crypto companies register with a federal regulatory agency and establish minimum listing standards for crypto tokens.

“Countless New Yorkers invest in cryptocurrency and digital assets, and more must be done to protect them and their money,” James said in a Thursday (April 10) press release announcing the letter. “Thousands of investors in New York and across the country have lost millions of dollars to cryptocurrency scams and fraud that could be prevented with stronger federal regulations.”

The letter comes as Congress prepares to pass the GENIUS Act, which would for the first time create rules for stablecoins, a type of crypto pegged to assets like the U.S. dollar. James’ letter said Congress should require stablecoin issuers to have a presence in the United States and deposit U.S. Treasuries and other cash equivalents in U.S. banks.

Meanwhile, a separate stablecoin bill, the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, has gotten some pushback from some state regulators. The Conference of State Bank Supervisors expressed concerns over the bill’s approach, which it said represents a dangerous expansion of federal oversight at the expense of state regulatory authority.

This week, lawmakers heard from attorneys and executives from the crypto sector who said that securities laws need to be readjusted to account for some of the unique properties of digital assets.

“While many of crypto’s early use cases have been financial, crypto is a general-purpose technology with countless applications,” testified Rodrigo Seira, special counsel at Cooley. “Crypto provides new ways for individuals to be economically rewarded for their contribution to networks and other public goods, opening the door to people around the country that lack the traditional advantages of capital and credentials.”

The current securities regulatory framework is “not a viable option” to regulate cryptocurrencies, Seira said. In practice, “virtually no crypto projects have successfully registered their tokens under federal securities laws and lived to tell the tale.”

Projects that tried to comply with the Securities and Exchange Commission’s requirements ultimately failed or wound up “in a state of regulatory uncertainty,” he told lawmakers.