New York Is Back in the News with a Bill to Tackle Digital Asset Crime

Bob Mason
Updated: Apr 28, 2022, 04:48 GMT+00:00

New York City's ambition of becoming a digital asset hub comes into further question as lawmakers look to introduce more digital asset legislation.

New York City

Key Insights:

  • On Wednesday, New York lawmakers shifted their attention to illegal activity in the digital asset space.
  • A new bill aims to make crypto rug pulls illegal in the State of New York.
  • Earlier this week, Bitcoin (BTC) mining was in focus, with New York taking steps to clean up crypto mining.

New York State appears to be placing increased attention on digital assets this year. Illicit activity has risen sharply this year.

In recent months, governments and regulators have called for the increased scrutiny of digital assets.

New York State lawmakers have been busier than most this week. On Wednesday, lawmakers looked to curb illicit activity with a new bill aiming to classify crypto rug pulls as criminal activity.

New York State Lawmakers Introduce a Bill to Target Rug Bulls

On Wednesday, Kevin Thomas introduced Senate Bill S8839, which,

“Establishes the offenses of virtual token fraud, illegal rug pulls, private key fraud, and fraudulent failure to disclose interest in virtual tokens.”

As a result of a rise in illicit activity that has included rug pulls and hacks, lawmakers are introducing a legal framework to target cybercriminals.

Several rug pulls hit the crypto news headlines in recent months. There have also been some sizeable hacks, with North Korean and Russian cybercriminals targeting exchanges and holders of cryptos and NFTs.

The penalties for violating the provisions of the bill include “a civil fine of not more than five million dollars or imprisoned not more than twenty years, or both, except where such a person is a person other than a natural person, a fine not exceeding twenty-five million dollars.”

A natural person is an individual human being, while a legal person could be a private or public company.

At the time of writing, lawmakers had yet to debate Senate Bill S8839.

New York Looks to Build a Legislative Digital Asset Framework

The latest bill follows in the footsteps of Assembly bill A7389C. On Wednesday, FX Empire reported on Assembly bill A7389C that,

“Establishes a moratorium on cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions; provides that such operations shall be subject to a full generic environmental impact statement review.”

The bill went on further to say that, for a period of two years, the Department of Public Service will not approve a new application or issue a new permit for “an electric generating facility that utilizes carbon-based fuel and that provides, in whole or in part, behind-the-meter electric energy consumed or utilized by cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions.”

In addition, the Department of Public Service may not approve an application to renew an existing permit during the two-year period.

At the time of writing, the bill was pending a Senate vote.

With lawmakers looking to build a more robust legislative framework, more questions will likely follow vis-a-vis New York’s ambitions to become a digital asset hub.

NYC Mayor Eric Adams and NewYorkCoin Send Mixed Signals

In February, Mayor Adams voiced his opposition to crypto mining at a local government budget hearing.

For Bitcoin (BTC) and the broader crypto market, the opposition to crypto mining came despite Adams taking a Bitcoin salary and supporting NewYorkCoin (NYC).

Powered by Stacks (STX), CityCoins is “a protocol that enables smart contracts on the Bitcoin network.” Miners can forward STX into the Stacks protocol. CityCoins miners receive 70% of all stacked STX tokens in NewYorkCoin. Miners can then mine the rewarded NYC to earn BTC rewards.

The remaining 30% goes to City Wallets. In the case of New York City, Mayor Adams can either exchange the accrued tokens for fiat or mine the STX tokens to earn Bitcoin.

In March, FX Empire reported a snag with NYC. According to the report, crypto exchanges that have procured a BitLicense have not listed NYC, which then prevents citizens from trading in NYC.

The report highlights that “New York’s BitLicense regulatory regime is the most demanding in the United States. Digital currency firms in New York currently have to apply for a BitLicense, which can take years to process.”

As a result, crypto-related firms have gone elsewhere, questioning further New York’s ambitions to become a center of innovation.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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