NY AG James: CLARITY Act Would Gut State Crypto Fraud Powers

Beyond jurisdiction, James called for tighter anti-money-laundering rules, know-your-customer requirements, and cybersecurity standards for crypto platforms. She proposed prohibiting the conversion of untraceable assets – those processed through mixers – into U.S. dollars. Platforms should monitor for suspicious activity and market manipulation, she wrote, and intermediaries should be financially liable when they fail to protect users from scams.

James also pressed for transparency rules tied to democratic integrity. Anonymous transactions complicate verifying officials' financial disclosures, detecting bribes, and enforcing conflict-of-interest and emoluments rules, she said. She recommended barring current and recent government officials from regulatory roles in industries where they hold personal financial interests.

Supporters of the CLARITY Act say the bill provides needed regulatory clarity to foster innovation. It includes certain fraud and anti-money-laundering measures. Congress is seeking a Senate floor vote on what would be the first comprehensive federal framework for crypto market structure.

The legislative window narrows before the congressional recess. The debate pits uniform national rules against the local enforcement record that James argues has been effective where federal oversight has not.

Senator Rick Scott has separately warned that delaying a vote risks the U.S. losing its lead in crypto innovation. CLARITY Act delay risks US crypto lead, Haridopolos warns.

James's testimony drew no direct response from the bill's sponsors. The Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations received the submission ahead of a scheduled markup.