New York AG warns CLARITY Act could weaken state crypto enforcement

New York Attorney General Letitia James urged Congress to strengthen oversight of cryptocurrency companies, warning that proposed federal legislation could weaken states’ ability to investigate scams and hold platforms accountable.

In written testimony submitted Monday to the Senate Permanent Subcommittee on Investigations, James said the Digital Asset Market Clarity Act would override state regulation of digital asset markets and shift oversight to the Commodity Futures Trading Commission. She argued that this would undermine state and local enforcement.

According to the attorney general, complaints about crypto scams received by her office have tripled over the past three years, while reported losses totaled nearly $500 million over five years.

Key provisions urged by James

James called for crypto platforms to:

• Comply with anti-money laundering, know-your-customer, and cybersecurity requirements
• Conduct surveillance for suspicious activity and market manipulation
• Be held financially liable when they fail to protect customers from fraud
• Be prohibited from converting mixer-linked or otherwise untraceable crypto into US dollars

She also urged Congress to:

• Preserve existing state money transmission, commodities and securities laws
• Bar elected officials and recent government officials from regulating crypto when they may have financial interests in the industry

Related: Crypto advocacy groups support CLARITY passage as ethics rules face pushback