New York lawmakers have unveiled a sweeping piece of legislation aimed at tackling crypto fraud head-on. 

Assembly Member Clyde Vanel introduced Bill A06515 on March 5, marking the state's latest effort to impose order on an industry notorious for its volatility, speculation, and, increasingly, fraud.

If passed, the bill would amend New York's penal law to introduce a new section—Article 191—dedicated solely to "Crypto Fraud." This legislative framework would not only define key crypto-related terms like "virtual tokens," "stablecoins," and "security tokens," but also set clear-cut rules on what constitutes fraudulent activity in the space. 

It introduces penalties that could shake up the industry, with fines reaching as high as $5 million for individuals and $25 million for entities, along with potential prison sentences of up to 20 years.

At the heart of the bill is an attempt to curb some of the most common and damaging forms of crypto-related fraud. It specifically takes aim at deceptive practices, misleading promotions, and market manipulations that have plagued the industry. 

One of the standout provisions targets “rug pulls,” a type of scam where developers create a cryptocurrency, build hype around it, and then suddenly sell off their holdings, leaving investors with worthless tokens. 

Under the proposed law, developers who own more than 10% of a token’s supply would be prohibited from selling more than that amount within five years—a clear signal that New York is looking to end the era of pump-and-dump schemes.

Another critical section deals with private key fraud, making it illegal to obtain or misuse someone’s crypto wallet access without explicit consent. This provision reflects the growing concerns around hacks and phishing schemes that have drained billions from unsuspecting investors worldwide. 

Additionally, developers would be required to publicly disclose their holdings in the tokens they create, a measure designed to increase transparency and prevent insider manipulations.

The timing of this legislation is no coincidence. Just weeks ago, Argentina was rocked by a political and financial scandal surrounding the cryptocurrency $LIBRA. President Javier Milei publicly promoted the token, driving up its value, only for it to collapse spectacularly shortly afterward—leading to allegations of fraud, investor losses, and even calls for his impeachment.

 The chaos in Argentina has sent shockwaves through the global financial community, serving as a stark reminder of how easily unregulated crypto markets can be manipulated.

Read more: Javier Milei responds to Libra controversy: "I only spread the word"

With this new bill, New York is making it clear that it will not allow such disasters to unfold within its borders. The legislation represents one of the most aggressive state-level attempts to regulate crypto fraud, setting a precedent that could be followed by other states and even influencing future federal policies.

As the bill heads to the Committee on Codes for review, it is sure to spark debate among crypto advocates, legal experts, and consumer protection groups. Some will argue that the regulations are necessary to rein in a Wild West industry, while others will warn that excessive rules could stifle innovation in a space that thrives on decentralization.

Regardless of where one stands, one thing is clear—New York is not waiting for the next crypto catastrophe to act. The state has long positioned itself as a financial watchdog, and with this legislation, it is doubling down on its commitment to protecting investors from the darker corners of the digital asset world.

Read more:$4.6B to $200M: How $LIBRA became the fastest crypto collapse