Client Alert: New York’s Proposed “CRYPTO Act” Adds Criminal Penalties for Unlicensed Virtual Asset Activity
New York County District Attorney Alvin Bragg and New York State Senator Zellnor Myrie recently announced draft legislation—the so-called “CRYPTO Act”—that would create additional state criminal exposure for cryptocurrency businesses operating without a valid New York license.
Distilled, the act makes it a criminal offense to engage in a “prohibited virtual currency act” in New York without the required New York BitLicense issued by the New York Department of Financial Services.
Under New York law, a “prohibited virtual currency act” includes the following five specific, customer-facing activities involving New York or its residents: transmitting, storing, buying/selling, exchanging, or issuing/controlling virtual currency.
Analysis
Under current New York law, businesses that receive money for transmission, i.e., money transmitters, are required to obtain a license from the New York State Department of Financial Services. It is criminally punishable in New York to operate as an unlicensed money transmitter (New York Banking Law Article 13-B, § 650), and transmission of high amounts is punishable as a felony. Likewise, operation of a money transmitter without the requisite state license (and the creation of a legal sufficient anti-money laundering program) is a felony under U.S. federal law 18 U.S.C. § 1960.
The proposed CRYPTO Act would criminalize not just unlicensed transmission of convertible virtual currency, but more generally the operation of a business that engaged in “virtual currency acts” within New York, including storing, buying/selling, exchanging, or issuing/controlling virtual currency. For purposes of New York law, convertible virtual currency is treated as a form of value, and the transmission of convertible virtual currency would require a New York money transmitters license.
The proposed penalties are harsh: it would be a class “C” felony to engage in unlicensed activity involving more than $100,000 in 30 days, or $1 million in activity over the course of a year.
Outlook
The bill has been introduced in the New York State Senate and is expected to move through committee during the 2026 legislative session. Market participants with exposure to New York—whether through exchange operations, kiosk networks, OTC activity, or cross-border crypto services—should monitor its progress and reassess licensing and AML touchpoints accordingly.
This Client Alert provides general information and is not intended as legal advice.