New York Attorney General Calls for Federal Crypto Regulation to Curb $12 Billion in Fraud Losses

New York Attorney General Letitia James has called on Congress to enact federal legislation to establish a regulatory framework for cryptocurrencies. In a letter sent to congressional leaders on April 10, James emphasized the urgent need for national rules to mitigate the risks of financial fraud, criminal abuse, and market instability within the digital asset sector.

James highlighted that crypto-related scams account for a significant portion of financial fraud incidents and losses. She cited an estimated $12 billion in losses to crypto fraud in 2024 alone, underscoring the need for stronger federal oversight to reduce these losses and enhance investor protections. The lack of federal regulation, she argued, enables price manipulation and opaque practices within crypto markets, which can be detrimental to financial stability and national security.

In her letter, James proposed several key provisions for federal legislation. These include requiring stablecoin issuers to be based in the US and maintain reserves in US dollars or treasuries, subjecting these issuers and other intermediaries to registration and compliance obligations. She also recommended restricting crypto dealings to anti-money laundering (AML) compliant platforms and barring the inclusion of digital assets in retirement accounts.

James further called for broader transparency in crypto markets, including protections against conflicts of interest, increased price disclosure, and regulatory accountability for all intermediaries. She argued that such standards are necessary to protect retail investors from opaque and fraudulent business practices that continue to evolve without comprehensive oversight.

The letter comes at a time when the US Department of Justice has recently restructured its crypto fraud enforcement initiatives. James argued that regulatory clarity is now critical given this shift in federal enforcement posture. She maintained that the burden of enforcement cannot fall solely on state regulators, especially as digital assets become increasingly embedded in financial systems.

James reiterated her position that uniform federal legislation is essential to prevent market abuses and promote accountability. She asserted that clear federal rules could help eliminate loopholes that allow fraudulent activity to persist across jurisdictions. The NYAG's call for federal regulation underscores the growing recognition of the need for a comprehensive framework to govern the rapidly evolving digital asset sector.