Illinois Senate Passes Digital Assets and Consumer Protection Act to Combat Crypto Fraud
A new bill aimed at cracking down on crypto fraud and deceptive practices has been approved by the Illinois Senate, signaling a significant step towards consumer protection in the digital asset space.
The Digital Assets and Consumer Protection Act, officially known as Senate Bill 1797, was introduced by Senator Mark Walker and passed with a 39-17 vote on April 10. The bill seeks to regulate and oversee crypto businesses operating within the state by mandating registration with the Illinois Department of Financial and Professional Regulation.
Key Provisions of SB1797
Under SB1797, any firm offering digital asset services to residents of Illinois, regardless of their location, must register with the regulatory authority. The bill also requires these companies to disclose their fee structures, insurance coverage for user assets, and potential risks such as fraud, outages, and security breaches.
Additionally, the legislation targets shady exchange practices by mandating platforms to assess security risks, disclose conflicts of interest, and conduct regular reviews to ensure the suitability of listed tokens. Platforms must also report to the regulatory authority before listing any new token, detailing measures taken to prevent manipulation, price rigging, and insider-driven scams.
Furthermore, SB1797 prohibits crypto businesses from commingling user funds with their own assets and restricts the use of customer funds for lending or other purposes without explicit consent. In the event of bankruptcy, user assets will be treated as trust property, safeguarding them from company liabilities.
Enhanced Consumer Protections
Aside from registration and operational requirements, the bill establishes a framework for complaint handling and customer service. Covered firms are mandated to provide toll-free helplines, clear dispute resolution processes, and fraud reporting mechanisms to enhance consumer protections.
The introduction of the Digital Assets and Consumer Protection Act comes in response to a surge in crypto-related scams in Illinois, with the state ranking sixth nationwide for losses due to fraud in 2023. Senator Walker emphasized the importance of accountability and guidelines to rebuild public trust in the digital asset space.
National Trend Towards Consumer Protection
Illinois joins other states in implementing measures to protect consumers in the crypto sector. Recent legislative actions in California and North Dakota have focused on expanding protections for crypto payments and targeting fraud in the crypto ATM industry, respectively.
With the rise of crypto scams and frauds across the industry, initiatives like the Digital Assets and Consumer Protection Act aim to safeguard investors and promote transparency in the rapidly evolving digital asset landscape.