The Illinois Senate passed a bill targeting crypto fraud and deceptive practices.
Called the Digital Assets and Consumer Protection Act, introduced by Senator Mark Walker, 1797, it cleared the Chamber of Commerce on April 10 with a vote of 39-17.
The bill aims to lead crypto companies to more scrutiny by requiring them to register with Illinois’s Department of Financial Regulation before they can operate within the state.
Key provisions in SB1797 include mandatory registration of companies that provide digital asset services to Illinois residents, even if they are based out of state.
SB1797 describes important risks, including the possibility that crypto companies will lay out a full fee structure and require users to notify them if their assets are insured, and may lose access to funds due to fraud, suspension, or security breach.
Additionally, the bill cracks down on shady exchange practices. Listing platforms should conduct regular reviews to assess security risks, disclose potential conflicts of interest, and determine whether the token is suitable for the list.
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Before listing tokens, the platform should report to the Department of Finance and Professional Regulation about the steps it is taking to prevent operations, price rigging, and insider-driven fraud.
Additionally, companies must store user assets separately from their own and are prohibited from using customer funds for lending or other purposes without consent.
In the case of a bankrupt company, these assets are legally protected and are treated as trust assets rather than holdings by the company.
SB1797 also sets up a complaint handling and customer service framework. Target companies must provide a toll-free helpline and well-defined processes for dispute resolution and fraud reporting.
The bill comes amid growing concern over Illinois’s crypto-related fraud. In a press release that accompanied it, Walker highlighted the need for “guidelines and accountability” to rebuild public trust in the space.
Illinois ranked sixth in the nation for losses from crypto fraud in 2023, with over 1,900 complaints, according to FBI data. While fraud like rug pulling and pig slaughtering is nothing new, Crypto’s anonymous nature has made it famous for its difficulty in bringing fraudsters to justice.
With the rise in crypto fraud and fraud across the crypto sector, similar consumer protection measures are coming in many US states.
Last month in California, Congress member Avelino Valencia revised AB 1052 to expand crypto payments and self-reliance protections. Meanwhile, North Dakota HB 1447, which passed the Senate on March 18, will target crypto ATM-related fraud through stricter licenses, daily caps and reporting rules.
read more: South Korea has launched its official crypto crime prosecutor’s division
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