Introduction
In a significant shift in regulatory approach, Manhattan District Attorney Alvin Bragg, alongside New York State Senator Zellnor Myrie, has proposed new legislation intended to penalize operators of unlicensed cryptocurrency businesses with criminal charges. This proposed law, known as the CRYPTO Act, suggests that individuals facilitating over $1 million in virtual currency transactions annually would face severe repercussions—including potential prison sentences of up to 15 years.
Addressing Regulatory Loopholes
This initiative is designed to address what Bragg described as a critical loophole in New York’s current regulatory framework, specifically the BitLicense system. Presently, failure to register as a crypto business results only in civil penalties. Bragg emphasized the need for enhanced accountability within the cryptocurrency sector, stating,
“The crypto space needs accountability ‘on steroids.'”
Proposed Classifications and Penalties
Under the proposed legislation, any unlicensed cryptocurrency operation would initially be classified as a Class A misdemeanor. If a business conducts transactions exceeding $25,000 in a 30-day period, it escalates to a Class E felony. The most severe designation, a Class C felony, would apply to cases where yearly transactions surpass $1 million, carrying a potential prison term of 5 to 15 years. Bragg expressed urgency, noting the growing use of cryptocurrency by criminals to obscure illicit proceeds and asserting that businesses that neglect licensing should face significant legal consequences.
Contrast with Federal Regulations
This push for stronger regulation at the state level comes in stark contrast to recent federal moves, particularly following the Trump administration’s decision to dismantle the National Cryptocurrency Enforcement Team in April 2025. This federal shift, which prioritizes terrorism and drug-related cases, has raised concerns among six Democratic senators about conflicts of interest, prompting New York to step in and compensate for the federal retreat by pursuing criminal penalties against unlicensed crypto operations.
Broader Context and Future Steps
The broader context includes ongoing federal efforts to establish a comprehensive regulatory framework for cryptocurrency, as mandated by the implementation of the GENIUS Act. This act is currently in the process of being rolled out, with various federal agencies, including the FDIC, OCC, and Treasury, working on regulations that apply only to licensed entities. Consequently, the CRYPTO Act aims to address the regulatory void faced by unlicensed operators, seeking to bring penal accountability where the federal guidelines have lagged. As it stands, the proposed legislation awaits passage in the New York State legislature, with no definitive timeline publicly established yet.
