Has New York State gone astray in its pursuit of crypto fraud?
The Empire State made two appearances on the regulatory stage last week, and neither was entirely reassuring.
On April 25, bill S8839 was proposed in the New York State (NYS) Senate that would criminalize “rug pulls” and other crypto frauds, while two days later, the state’s Assembly passed a ban on non-green Bitcoin (BTC) mining. The first event was met with some ire from industry representatives, while the second drew negative reviews, too. However, this may have been more of a reflex response given that the “ban” was temporary and principally aimed at energy providers.
The fraud bill, sponsored by State Senator Kevin Thomas, looked to steer a middle course between protecting the public from scam artists while encouraging continued innovation in the crypto and blockchain sector. It would criminalize specific acts of crypto-based chicanery including “private key fraud,” “illegal rug pulls” and “virtual token fraud.” According to the bill’s summary:
Critics were quick to pounce, however, assailing the bill’s relevance, usability, overly broad language and even its constitutionality.
The Blockchain Association, for instance, told Cointelegraph that the bill as currently written is “unworkable,” with “the biggest nonstarter being the provision obligating software developers to publish their personal investments online, and making it a crime not to do so. There’s nothing remotely like this in any traditional industry, finance or otherwise, even for major shareholders of public companies.”
The association further added that all the specified offenses were already covered under New York State and federal law. “There’s no good reason to create new offenses for ‘rug pulls.’”
Stephen Palley, partner in the Washington D.C. office
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