- The Illinois Senate has recently voted in favor of a bill under which crypto-related firms must obtain state-level licenses.
- The bill aims to counter abuses such as rug pulls and untruthful fee-charging mechanisms.
- Recent memecoin scams, including Libra and WOLF token crashes, led to regulatory measures to safeguard investors.
Illinois lawmakers have recently enacted a regulatory bill to increase its supervision of cryptocurrency businesses and investors from scams. The bill was passed on April 10 and signed by the Illinois Senate in a 39 to 17 vote supporting Senate Bill 1797 (SB1797).
Known formally as the Digital Assets and Consumer Protection Act, SB1797 creates new regulatory power for the Illinois Department of Financial and Professional Regulation in connection with business in digital assets in Illinois. The bill also mandates that anyone providing cryptocurrency transactions and related services to residents of Illinois must first obtain a license from the state’s financial regulator.
Entities in the business of digital assets must ensure that all the user fees and charges are promptly and early communicated. This requirement ensures adequate disclosures of fees and charges, which would be detrimental to retail investors. The bill stipulates that no firm transacts in any digital asset or holds itself out as a crypto service provider without being registered.
The bill was proposed in February by Senator Mark Walker, who also stressed the necessity of stronger protection for residents who invest in cryptos in the state of Illinois. In the statement made on April 4, Walker described the development of digital assets, noting that while the market is saturated with numerous opportunities to generate new sources of income, investors face increased risks connected with fraud and bankruptcy.
Growing Concerns Over Crypto Fraud Drive Legislative Action
Crypto regulation in Illinois follows as more people fall victim to cryptocurrency scams, especially those involving memecoins and insider trading. The move also comes as other states step up the pressure in a bid to regulate the industry better. In March, New York presented Bill A06515 to criminalize fraud with cryptocurrency and to counteract actions similar to rug pulls.
A rug pull is a scam where a project team undermines the token price and removes its value to benefit themselves at the cost of their investors. The regulation came at a time when investors in Illinois lost substantial amounts of money to fraud and failed in the crypto market.
High-Profile Memecoin Scams Highlight Market Vulnerabilities
One of the most recent and famous examples is the case linked to the Libra token associated with Argentine President Javier Milei. In March, insiders are said to have siphoned off over $107 million in liquidity and subsequently caused a 94% drop, leaving nearly $4 billion wiped from its market value.
The same thing happened on March 16 when Hayden Davis, who is the co-creator of both the Official Melania Meme (MELANIA) and Libra tokens, launched another token known as WOLF. According to data, over 82% of WOLF tokens were owned by a single entity. After the last spike to $42 million in market capitalization, the token further plummetted 99%.
Argentine lawyer Gregorio Dalbon has since sought an Interpol arrest warrant for Davis, citing the procedural possibility that Davis may escape the United States or go into hiding owing to his wealth.
