New York AG Says Federal Crypto Bill Could Undermine State Enforcement Powers

New York Attorney General Letitia James has warned Congress that the proposed Digital Asset Market Clarity Act could weaken states’ ability to investigate crypto scams and hold platforms accountable.

Concerns Over Federal Preemption

In written testimony submitted to the Senate Permanent Subcommittee on Investigations, James argued that the bill would shift regulatory oversight of digital asset markets to the Commodity Futures Trading Commission, potentially undermining state and local enforcement efforts. She noted that complaints about crypto scams to her office have tripled over the past three years, with reported losses reaching nearly $500 million over five years.

Recommendations for Stronger Protections

James called on Congress to require crypto platforms to follow anti-money laundering, know-your-customer, and cybersecurity standards, along with monitoring for suspicious activity and market manipulation. She also urged lawmakers to hold platforms financially responsible when they fail to protect customers from fraud and to block the conversion of untraceable crypto funds into U.S. dollars.

Additional Proposals

James further recommended preserving existing state money transmission, commodities, and securities laws, and proposed barring officials with financial ties to the crypto industry from regulating it.