Manhattan District Attorney Alvin Bragg has issued a forceful call to New York state lawmakers to strengthen cryptocurrency regulation by criminalizing unlicensed operations, warning that regulatory gaps are enabling a "$51 billion criminal economy." Speaking at New York Law School, Bragg detailed how weak oversight allows illicit funds from guns, drugs, fraud, and terrorism financing to flow through unlicensed platforms with minimal consequence.
Bragg specifically targeted unlicensed cryptocurrency kiosks and ATMs, which he said often charge fees as high as 20% to convert cash into digital assets while asking few questions about the source of funds. "They know you're laundering gun proceeds," Bragg stated during his remarks. "And they do it without necessarily asking you." He argued these machines have become a preferred tool for criminals seeking to move illicit money into crypto without interacting with regulated financial institutions.
The prosecutor emphasized that current laws force investigators to rely too often on criminals making mistakes, such as accidentally touching the traditional banking system or boasting about crimes online. "We shouldn't need someone to slip up," Bragg argued. "There are people far wiser than that."
Bragg's proposed solution includes mandatory licensing and know-your-customer (KYC) requirements for all crypto businesses operating in New York, backed by criminal penalties for violations. He stated that any company involved in transferring, trading, or facilitating the movement of digital assets should be subject to the same baseline oversight. "If you are operating a crypto business, you should be licensed," Bragg said. "It's that simple." If adopted, this measure would make New York the 19th U.S. state to criminalize unlicensed crypto operations.
The push for enhanced regulation follows prominent incidents like the NYC Token crash, which Bragg cited as an example of regulatory shortcomings. The token, linked to former NYC Mayor Eric Adams, lost over 80% of its value due to a major liquidity withdrawal, highlighting vulnerabilities in token economies and centralized launch risks. Bragg underscored the necessity for enhanced investigative capabilities, noting, "Our ability to conduct blockchain analysis... is unique for a local prosecutor's office, and critical to many of our investigations and prosecutions."
During a question-and-answer session, concerns were raised about elderly New Yorkers losing life savings to "pig-butchering" crypto scams, where victims are groomed online before being convinced to send crypto to fraudulent addresses. Bragg acknowledged the difficulty of recovering stolen funds and pointed to proposed legislation, including Senator Zellnor Myrie's R.I.P.O.F.F. Act, as a way to expand recovery tools.
This regulatory push in New York aligns with escalating federal enforcement. Earlier in the week, US prosecutors in Massachusetts sought the forfeiture of $200,000 in USDT linked to a romance-based crypto scam. Crypto scammers defrauded victims of at least $9.9 billion in 2024, marking one of the most significant financial crimes of the year.
