As Congress settles into its August recess, state legislatures nationwide are actively shaping the future of the crypto industry through new laws and regulations. In this blog post series, we’ll explore the recent actions taken by various states and the potential impact on the digital asset landscape.
New York Crypto Regulation, Protection, Transparency, and Oversight (CRPTO) Act
New York’s crypto community faced a concerning development when the Attorney General’s office proposed a massive overhaul to the state’s crypto regulations with only a month left in the state’s legislative session. Driven by market volatility at the end of 2022, the CRPTO Act’s stated goal was to provide, “the strongest and most comprehensive set of regulations on cryptocurrency in the nation.”
However, many of the new requirements it proposed were duplicates of existing standards already enforced by the New York Department of Financial Services (DFS), and it failed to include any meaningful input from impacted stakeholders.
It also included a ban on businesses and their affiliates from engaging in different lines of digital asset business, a more restrictive standard than what’s expected in traditional financial service markets. Many existing New York BitLicensees intentionally established corporate structures and operations to comply with the state’s current regulatory regime, which does not include this prohibition and permits the offering of different types of digital asset services in a responsible and regulated fashion. This provision alone would have made it impossible for many licensed digital asset companies to continue operating in New York.
Thankfully, with engagement and education from a variety of market participants, the State Legislature chose not to introduce the bill, and it failed to move forward before the end of session. Going forward, CCI and other stakeholders will continue working with policymakers to share technical knowledge, ensure robust standards, protect consumers, and maintain New York’s status as a financial and innovation capital.
You can get into the details with our industry comment letter here.
California Assembly Bill 39
California’s effort to regulate digital assets has been proceeding through the legislative process in Sacramento. Assembly Bill 39 would establish a licensing and regulatory framework for digital financial asset business activity. A version of the bill was vetoed by Governor Gavin Newsom last year, but the legislature has been determined to move it forward this session. The bill has already passed the State Assembly and was advanced through two of its three committees of jurisdiction in the Senate over the summer.
While state-based regulatory frameworks can enhance investor protections and deter bad actors, there are concerns that overly broad legislation might unintentionally impact unrelated blockchain activities or hinder innovation for smaller businesses. Industry stakeholders are actively working with the legislature to bring clarity to potential licensees, address compliance challenges, and foster digital asset innovation to maintain California’s leadership in the industry.
See CCI’s statement on the bill from April HERE for more information. All eyes will be on this bill as the legislature enters the final stretch before it adjourns in September.
State legislatures will continue to shape the regulatory landscape for cryptocurrencies. Collaboration between government officials, market participants, and other stakeholders is essential for crafting effective and balanced regulations that promote innovation while safeguarding consumers and market integrity. Stay tuned for further updates as we breakdown more action in this rapidly evolving space.