New York Attorney General Letitia James is backing new legislation to change state business law and impose stricter regulations on digital assets like cryptocurrency to crack down on unregistered platforms and strengthen protections for investors in the industry.

The cryptocurrency industry has largely remained void of regulations and transparency — leading to crime and fraud.

The Crypto Regulation, Protection, Transparency, and Oversight Act would mandate independent public audits of cryptocurrency transfers and prevent people from owning those companies, such as brokerages and tokens, to stop conflicts of interest and embolden the state Department of Financial Services oversight and regulatory power of digital assets, according to the attorney general's office.

“Rampant fraud and dysfunction have become the hallmarks of cryptocurrency and it is time to bring law and order to the multi-billion-dollar industry,” James said in a statement Friday. “New York investors should have the peace of mind that there are safeguards in place to protect them and their money. All investments are regulated to account for every penny of investors’ money — cryptocurrency should be no exception. These commonsense regulations will bring more transparency and oversight to the industry and strengthen our ability to crack down on those that don’t pay respect to the law.”

The legislation would require crypto companies to make financial statements public, crack down on industry conflicts of interests and impose protections for crypto investors.

Crypto platforms would also be required to reimburse customers who are the victims of fraud.

Millions of investors have lost hundreds of billions of dollars in value of cryptocurrency investments because of rampant fraud caused by market manipulation, hacking and opaque business practices, according to the attorney general's office.

The bill would increase transparency in the industry by requiring:

• Undergo mandatory independent auditing and publish audited financial statements
• Provide investors with material information about issuers, including risks and conflict-of-interest disclosures
• Require marketplaces to establish and publish listing standards
• Require cryptocurrency promoters to register and report their interest in any issuer whose crypto assets they promote

Crypto companies are not required to publicly disclose their finances, which inflates prices and prevents investors from knowing the true risk of investing in a cryptocurrency, according to James' office.

The bill would permit the state attorney general to enforce the law by issuing subpoenas, impose civil penalties of $10,000 per violation per person or $100,000 per violation per ferm, collect restitution and damages and shut down businesses participating in fraud.

If passed and signed into law, the measure would also codify DFS’ authority to oversee licensing of digital assets and license digital asset brokers, marketplaces, investment advisors before conducting business in the state.

“The cryptocurrency industry is in need of regulation and oversight,” state Comptroller Thomas P. DiNapoli said in a statement. “As the financial capital of the world, New York must lead these efforts."

The bill would stop conflicts of interest in the industry by:

• Preventing common ownership of crypto issuers, marketplaces, brokers and investment advisers and preventing any participant from engaging in more than one of those activities
• Preventing crypto brokers and marketplaces from trading for their own accounts
• Prohibiting marketplaces and investment advisers from keeping custody of customer funds
• Prohibiting brokers from borrowing or lending customer assets
• Prohibiting referrals from marketplaces to investment services for compensation

“As the cryptocurrency industry grows and captures the interest of investors across the state, it is imperative that our constituents are appropriately safeguarded against the threats at hand,” state Sen. James Sanders Jr. said in a statement. “As the chairman of the Committee on Banks in the New York state Senate, it is no mystery to me that regulated financial markets are essential to avoid consumer fraud and conflicts of interest. Furthermore, with people of color investing in the crypto market at higher rates, the potential for financial harm is greater amongst communities of color. This simple fact calls for a framework to be established which promotes transparency and protections for crypto investors, similar to those which exist for other financial institutions. Only then will our residents be equipped to make fully informed and leveled financial decisions."

James in March filed a lawsuit against KuCoin for failing to register as a securities and commodities broker and falsely representing itself as a marketplace, and brought action against CoinEx for failing to register as a securities and commodities broker earlier this winter.