$11 Billion in Crypto Losses Adds Pressure on CLARITY Act

James Warns Federal Bill Could Weaken State Enforcement

New York Attorney General Letitia James called on Congress to adopt stronger federal safeguards for cryptocurrency markets while preserving state authority to pursue fraud cases, arguing that rising scam losses require tougher oversight instead of limiting state enforcement.

“My office has been leading the fight against cryptocurrency fraud. Our rules-based market system gives people confidence that they can do business here,” James stated in her congressional testimony on July 27. She added:

“Without adequate laws and regulations, financial crises ensue. We urge Congress to safeguard our financial markets and protect America’s investors, their future, our economy, and national security.”

Attorney General James argued that the CLARITY Act would transfer primary oversight of digital assets to the Commodity Futures Trading Commission (CFTC) while overriding important state regulatory authority, making it harder for states to investigate fraud and hold cryptocurrency businesses accountable.

Complaints submitted to James’ office about cryptocurrency scams almost tripled over the past three years, while reported crypto fraud and scam losses approached $500 million over the past five years.

Proposed Rules Target Fraud, Money Laundering, and Platform Responsibility

Attorney General James urged Congress to require cryptocurrency platforms to comply with anti-money laundering (AML) rules, know-your-customer (KYC) requirements, cybersecurity standards, market surveillance obligations, and financial responsibility for preventable fraud, while preserving existing securities, commodities, and money transmission laws.

She also recommended restricting cryptocurrency transactions that cannot be fully traced from conversion into U.S. dollars and prohibiting elected officials and people who recently served in government from participating in cryptocurrency regulation when financial conflicts may exist.

Federal lawmakers continue debating the CLARITY Act after the House approved the legislation in July 2025. A year later, House lawmakers renewed their push for the bill at a hearing examining its proposed digital asset regulatory framework, while Senate action remained uncertain.

The attorney general highlighted several enforcement actions supporting her argument, including settlements involving Tether, Coin Café, Gemini, Genesis, Kucoin, and a recent agreement requiring Uphold to pay more than $5 million over its promotion of the CredEarn investment program.

FBI’s $11 Billion Crypto Loss Figure Adds Pressure for Tougher Rules

Federal authorities continue to report substantial financial losses from cryptocurrency-enabled crime. The Federal Bureau of Investigation (FBI) said Americans reported nearly $21 billion in cyber-enabled losses in 2025, adding: “Americans who submitted complaints involving cryptocurrency reported the highest losses, with 181,565 complaints totaling more than $11 billion.”

New York has also expanded consumer protection efforts beyond enforcement actions by warning residents about relationship-based cryptocurrency investment scams commonly known as “pig butchering” schemes. James has also criticized the GENIUS Act for failing to require stablecoin issuers to return stolen funds to fraud victims.