CLARITY Act threatens state-level cryptocurrency enforcement powers, warns New York's top prosecutor
Attorney General Letitia James of New York has raised concerns that federal legislation on crypto market structure may limit state regulatory authorities and called on Congress to strengthen consumer safeguards for digital asset services.
Congress must enhance regulatory oversight of digital asset companies, New York Attorney General Letitia James has emphasized, cautioning that pending federal bills could diminish the capacity of state authorities to pursue fraudulent schemes and maintain platform accountability.
Through written remarks delivered on Monday to the Senate Permanent Subcommittee on Investigations, James expressed concerns that the Digital Asset Market Clarity Act would supersede state-level regulatory authority over digital asset markets, transferring oversight responsibilities to the Commodity Futures Trading Commission. Such a shift, she contended, would compromise enforcement capabilities at the state and local levels.
Data from the attorney general's office reveals that cryptocurrency-related scam complaints have increased threefold during the past three years, with documented financial losses approaching nearly $500 million across a five-year period.
In her testimony, James advocated for cryptocurrency platforms to adhere to anti-money laundering protocols, know-your-customer verification procedures, and cybersecurity standards, while also implementing monitoring systems to detect suspicious transactions and market manipulation schemes.
Additionally, she pressed Congress to establish financial liability for platforms and intermediary services that fail in their duty to safeguard customers against fraudulent activities, to ban the conversion of crypto assets linked to mixers or otherwise untraceable currencies into US dollars, and to maintain current state-level regulations covering money transmission, commodities and securities laws.
James further recommended implementing restrictions that would prevent elected officials and recently departed government personnel from participating in cryptocurrency regulation when they hold financial stakes in the industry.