NY Attorney General Letitia James Warns Clarity Act Would Weaken State Power Against Crypto Fraud
New York Attorney General Letitia James has urged Congress to strengthen the proposed Clarity Act. She warned that the bill would reduce states’ ability to fight cryptocurrency fraud. James submitted written testimony on Monday to a Senate subcommittee.
James Criticizes Impact on State Authority
James said the Clarity Act would undermine New York and other states. New York has led crypto regulation for more than a decade. “The Digital Asset Market Clarity Act seeks to interfere with and preempt states’ investor protection laws as well as dilute our ability to prosecute fraud,” she stated. She added that state and local agencies handle most law enforcement work in the country.
Her comments come as lawmakers push for a Senate floor vote on the first major federal crypto regulation bill. Support remains uncertain after the latest text failed to win enough Democratic backing.
Push for Stronger Ethics and Anti-Fraud Rules
James called for tighter ethics rules. The current language bans public officials and their spouses from issuing or sponsoring digital assets. It does not cover other family members and includes a sunset clause ending in January 2029. She said ethics rules should block federal officials from regulating industries they profit from while in office and for one year after leaving.
She also demanded stronger anti-money-laundering safeguards. James wants Congress to hold DeFi platforms accountable as financial intermediaries. She urged a ban on crypto that cannot be fully traced through mixers and required platforms to follow know-your-customer and anti-money-laundering rules.
Tight Timeline and Rising Industry Pressure
Time is limited to pass the bill this year. The House is in its final week before recess, and the Senate plans to leave by August 7. Attention will then shift to the election cycle. Analysts call the next 10 days critical, especially on ethics issues.
Crypto industry groups are increasing pressure. Organizations including the Crypto Council for Innovation, Blockchain Association, and The Digital Chamber sent a letter urging passage. Stand With Crypto said it will score lawmakers on their votes. Franklin Templeton also publicly supported the bill, saying it would clarify regulation and protections for investors and firms.
