New York prosecutors are pressing lawmakers to turn unlicensed crypto operations into a jailable offense, noting that civil fines alone have failed to deter a growing underground economy fueled by crypto.
The bill would raise violations that currently carry only civil fines to criminal offenses with graduated penalties ranging from a Class A misdemeanor to a Class C felony for businesses handling $1 million or more in cryptocurrency within one year.
A Class C felony conviction carries a maximum sentence of five to 15 years in state prison, according to the statement.
Bragg said the expansion of crypto has enabled “a shadow financial system” that allows criminals to move and conceal illicit funds with ease.
“It is long past time for businesses that operate without a virtual currency license and flout due diligence requirements to face criminal penalties,” the DA said in the statement.
The measure addresses a growing enforcement gap as crypto increasingly facilitates criminal activity while unlicensed operators face minimal consequences.
New York and cryptoUnlike federal law, which allows up to five years in prison for unlicensed money transmission, New York currently imposes only civil penalties on violators, with eighteen other states already criminalizing unlicensed crypto operations.
"Nothing new is being outlawed. Crypto is not banned, DeFi is not banned, and users are not being targeted. The rules about who needs a license already exist. What changes is the consequence for ignoring those rules," Nicolai Søndergaard, Research Analyst at Nansen, told Decrypt.
Søndergaard warned that introducing criminal penalties while regulatory boundaries remain unclear could push companies to act conservatively or avoid New York altogether, making the industry more institutional and “more cautious, more bank-like,” even as it cleans up unlicensed operators and reduces regulatory arbitrage.
