New York Attorney General Letitia James told a Senate subcommittee that the Clarity Act would preempt state investor protection laws and dilute her office’s ability to prosecute fraud. Her written testimony landed as Republicans press for a Senate floor vote on the first federal rules for the crypto industry, a bill that has not yet won the Democratic support it needs.
New York Attorney General Letitia James urged Congress to tighten its proposed cryptocurrency legislation, warning that it would weaken states’ ability to police the industry, and asked lawmakers to add stronger anti-money-laundering and ethics safeguards. The Clarity Act would undermine New York, which has been a leader in regulating crypto for over a decade, as well as other states, she said in written testimony on Monday to the Senate Homeland and Governmental Affairs’ permanent subcommittee.
Her argument rests on who does the prosecuting. State and local law enforcement are responsible for around 98.8% of arrests across the country, James said, while federal authorities are responsible for around 1.2%. According to her testimony to the subcommittee: “State and local law agencies do the lion’s share of law enforcement work”.
What James asked Congress to add
James wants the ethics provision to block federal officials and employees from regulating industries they profit from while in office as well as a year after leaving public office. She also pushed Congress to hold DeFi platforms responsible for serving as intermediaries for potential fraud.
Beyond that, the bill should block crypto that cannot be fully traced after going through mixers and require crypto platforms to comply with know-your-customer and anti-money laundering rules, she said.
Democrats have their own objection to the same section of the bill. The text currently bars public officials and their spouses from issuing or sponsoring digital assets but does not cover other family members, gives enforcement authority to the Justice Department, and carries a sunset clause that would expire the restrictions in January 2029.
Ten days to a floor vote
Time is running out to get a bill signed into law this year. This week marks the House’s final week in session before it recesses, while the Senate is scheduled to leave Washington on Aug. 7.
Senate Majority Leader John Thune has signaled that he may set a floor time for the crypto bill before the August recess, regardless of whether he has the votes to invoke cloture. TD Cowen’s Washington Research Group, led by managing director Jaret Seiberg, called the next 10 days critical in a note on Monday, with ethics one of a few challenges.
If the bill does pass the Senate with at least 60 votes, it would still have to go back to the House, which voted to push it through a year ago.
Sources: New York Attorney General, The Block, CoinGape
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