A group of state prosecutors in the United States, alongside victims and compliance experts, has raised alarms about new legislative proposals. They warn that the impending cryptocurrency and fraud law could severely limit their ability to prosecute financial crimes. This concern arises amid staggering losses from scams, according to data from the Federal Trade Commission (FTC).
Protection or Barrier? The Dilemma of the New Crypto Regulation
Recent data paints a troubling picture for investors. The FTC reported that in the first half of 2024 alone, approximately $66 million was lost to fraud at cryptocurrency ATMs. In response, states have initiated over 330 enforcement actions against schemes like “pig butchering.” However, proposed federal legislation, such as the CLARITY Act and the GENIUS Act, aims to unify the market, which could undermine these local efforts. For instance, the Crypto ATM Fraud Prevention Act has already led to the closure of over 1,200 ATMs, sparking a sharp debate between accessibility and user protection.
One of the most technical and controversial points is the proposal to modify the federal definition of an “investment contract.” This change, while seemingly minor, is fundamental. It could reduce the legal scope for states to file securities fraud charges, thereby hindering civil and criminal liability. Currently, an investment contract allows prosecutors to act when someone invests money expecting profits from the efforts of others. Altering this definition could create legal loopholes that benefit scammers and negatively affect the digital economy.
The Technical Change That Could Protect Scammers
The impact of these scams extends beyond the numbers. Amy Nofziger of the AARP Fraud Watch Network highlights the devastation in victims’ lives, as they often lose their life savings. Regulatory risk is not the only issue. Anti-fraud measures increase operational costs for companies, and the continuous stream of scams erodes user trust, a cornerstone for mass adoption. Critics argue that the proposed framework favors large financial players over consumers.
As the debate continues in Congress, tension between federal regulations and state authority keeps growing. The progress of these bills will determine the future of financial oversight in the crypto ecosystem. The final decision will establish whether a framework that protects investors prevails or one that, according to its critics, opens the door to greater risks and difficulties in delivering justice.
