New York AG Warns Federal Crypto Bill Could Strip States of Enforcement Power
New York Attorney General Letitia James testified to Congress that the proposed Digital Asset Market Clarity Act would cripple state oversight of cryptocurrency platforms, even as crypto fraud complaints to her office have tripled in three years.
Federal Bill Could Preempt State Crypto Regulation
New York Attorney General Letitia James issued a forceful warning this week about proposed federal cryptocurrency legislation. In written testimony submitted to the Senate Permanent Subcommittee on Investigations, James expressed serious concern that the Digital Asset Market Clarity Act would consolidate regulatory power at the federal level and undermine state authority. According to her submission, the bill would transfer oversight of digital asset markets to the Commodity Futures Trading Commission, potentially preventing state attorneys general from investigating fraud and holding platforms accountable to consumers.
James’s warning comes as cryptocurrency fraud continues to surge. Complaints about crypto scams directed to the New York Attorney General’s office have more than tripled over the past three years, with reported losses totaling nearly $500 million across a five-year span. This upward trend highlights the scale of harm affecting consumers and the importance of maintaining enforcement tools at all levels of government.
Roadmap for Stronger Consumer Safeguards
Rather than accept the CLARITY Act as proposed, James outlined a regulatory framework she believes Congress should enact. She called for cryptocurrency platforms to comply with anti-money laundering and know-your-customer requirements, alongside mandatory cybersecurity standards. Platforms should conduct active surveillance for suspicious trading activity and market manipulation, she argued, and should face financial liability when they fail to protect customers from fraud.
James also proposed blocking the conversion of untraceable or mixer-linked cryptocurrency into U.S. dollars, targeting the use of privacy tools for illicit purposes. She urged lawmakers to preserve existing state authority over money transmission, commodities markets, and securities regulation—areas where states have exercised oversight authority for decades.
Addressing Industry Conflicts of Interest
In a separate recommendation, James suggested that Congress prevent elected officials and recently departed government workers from regulating cryptocurrencies if they maintain financial interests in the sector. This proposal aims to address conflicts of interest that could compromise regulatory impartiality.
The AG’s testimony underscores a fundamental disagreement between federal policymakers seeking unified crypto regulation and state authorities concerned about losing enforcement capabilities. For the broader crypto market, preserving state-level oversight powers could prove essential—robust consumer protections across multiple regulatory levels are vital to building public confidence in digital assets.
Source: New York Attorney General Letitia James, via Cointelegraph. Not financial advice.