New York Attorney General Letitia James announced on October 18 that she had ordered the shutdown of an unidentified group of cryptocurrency lending platforms operating in the state.
As per an official press release, the companies would be acting in contravention of the stipulations of General Business Law § 352 et seq —better known as the “Martin Act.”
Ms. James argues that cryptocurrency lending platforms are “interest-bearing accounts” and therefore must register with the Office of the Attorney General (OAG) in order to operate in New York.
Cryptocurrency Exchanges Are Not Above the Law
The Office of the New York Attorney did not specify the affected companies; however, the press release reveals that the Attorney General issued five notifications to a number of platforms operating in New York. To some, it was a cease and desist order. To others, she asked for information before taking further action.
“Cryptocurrency platforms must follow the law, just like everyone else, which is why we are now directing two crypto companies to shut down and forcing three more to answer questions immediately,”
Among a series of 14 demands, Attorney General asked the cryptocurrency businesses for user/client names, user IDs, date, time, IP addresses, and any other captured information of any client that could connect from New York.
Ms. James also asked for personal data of users with unverified accounts, breakdown of KYC procedures, jurisdictions to which they offer services, and legal documents.
New York: The Final Boss in the Crypto-Verse
New York is a haven for finance-related businesses. Still, it also has perhaps the state with the worst reputation in all the United States regarding the legal framework and its relationship with cryptocurrencies.
The infamous Bitlicense is known for making it almost prohibitively expensive and complex to operate a business associated with the exchange of cryptocurrencies. Its creator, Benjamin Lawsky, New York’s first Superintendent of Financial Services, left his position to found a successful consulting firm that provided services to those interested in obtaining, you guessed it, a Bitlicense.
Its elimination was one of the promises of Democrat presidential pre-candidate (who’s now running for New York City Mayor) Andrew Yang. Still, it seems that the current President of the United States, Democrat Joe Biden, does not share the same vision and has appointed a cabinet that is more oriented to control the industry.
Cryptocurrency lending service initiatives have not been having a good year in America. Even Coinbase, the largest volume cryptocurrency exchange in the US, could not keep up with a cryptocurrency lending service that aimed to outperform high-yield accounts offered by traditional banks.