Illinois Strengthens Cryptocurrency Regulations with New Laws
In a significant move to enhance the regulatory framework for cryptocurrencies, the state of Illinois has enacted two comprehensive laws aimed at providing the Illinois Department of Financial and Professional Regulation (IDFPR) with enhanced tools to oversee digital asset exchanges and prevent fraud at cryptocurrency kiosks. The legislation comes at a time when concerns about consumer protection in the crypto space are growing.
Empowering Regulators with New Authority
The first of these new laws, known as SB 1797, grants the IDFPR expanded authority to monitor and regulate digital-asset exchanges and related firms. Governor JB Pritzker highlighted the importance of this law by stating, “While the federal government appears to be easing regulations, Illinois is taking proactive steps to safeguard investors and consumers in the cryptocurrency market.”
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This new regulation mandates that companies dealing in digital assets maintain sufficient capital, establish robust cybersecurity and anti-fraud measures, provide clear investment disclosures, and adhere to customer service standards akin to traditional financial services. By doing so, Illinois aims to create an environment where consumers can engage with cryptocurrencies safely and securely.
Strengthening Consumer Protections
Governor Pritzker underscored the state’s commitment to protecting its citizens, stating, “With these first-of-their-kind safeguards in the Midwest, we are paving the way for a more secure and transparent cryptocurrency market. We will not tolerate fraudulent activities that exploit our residents.”
The legislation received approval from the state Senate in April, and it clarifies which entities fall under state regulations, ensuring greater accountability in the crypto industry.
New Restrictions on Cryptocurrency Kiosks
The second law, SB 2319, addresses the operation of cryptocurrency kiosks and ATMs, introducing several critical regulations. Operators are now required to register with state regulators, and kiosks must offer full refunds to eligible scam victims. Additionally, transaction fees are capped at 18%, and new users are subject to a $2,500 daily transaction limit.
These measures are designed to deter malicious actors and offer consumers a clear recourse in cases of fraud. Both state lawmakers and consumer advocates have welcomed these changes as necessary steps to protect Illinois residents from financial exploitation.
Political Implications of the New Laws
Governor Pritzker used the occasion to draw a clear distinction between state and federal approaches to cryptocurrency regulation. He criticized recent federal actions, such as the reversal of an IRS rule regarding broker definitions in decentralized finance, as a step back in consumer protection.
“In an era where fraudsters are becoming increasingly sophisticated and federal safeguards are being weakened, Illinois is making it clear that we stand firm in defending our citizens’ financial interests,” Pritzker stated. He emphasized that these state laws are a direct response to the growing threat of fraud and the perceived lack of federal oversight.
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