Illinois Senate Passes Digital Assets And Consumer Protection Act Targeting Crypto Crime

A bill targeting crypto fraud and deceptive practices has been passed by the Illinois Senate.

Dubbed the Digital Assets and Consumer Protection Act, Senate Bill 1797, introduced by Senator Mark Walker, cleared the chamber with a 39-17 vote on April 10.

The bill sets out to bring crypto businesses under tighter scrutiny by requiring them to register with the Illinois Department of Financial and Professional Regulation before operating in the state.

Some of the key provisions of SB1797 include mandatory registration for any firm offering digital asset services to Illinois residents, even if they’re based out of state.

SB1797 mandates crypto companies to lay out their full fee structure, inform users whether their assets are insured, and explain key risks, including the possibility of losing access to funds due to fraud, outages, or security breaches.

Further, the bill cracks down on shady exchange practices. Platforms listing crypto tokens must assess security risks, disclose potential conflicts of interest, and conduct regular reviews to determine if the token remains fit for listing.

Before listing any token, platforms must report to the Department of Financial and Professional Regulation regarding the steps they’re taking to prevent manipulation, price rigging, and insider-driven scams.

On top of that, businesses would be required to store user assets separately from their own and are prohibited from using customer funds for lending or other purposes without consent. 

In the case of a company going bankrupt, these assets would be legally protected and treated as trust property, not company holdings.

SB1797 also sets up a framework for complaint handling and customer service. Covered firms must offer toll-free helplines and clearly defined processes for dispute resolution and fraud reporting.

The bill comes amid rising concerns over crypto-related scams in Illinois. In an accompanying press release, Walker stressed the need for “guidelines and accountability” to rebuild public trust in the space.

Illinois ranked sixth nationwide for losses from crypto fraud in 2023, racking up over 1,900 complaints, according to FBI data. While scams like rug pulls and pig butchering aren’t new, the anonymous nature of crypto has made it notoriously tough to bring fraudsters to justice.

With crypto scams and frauds on the rise across the crypto sector, similar consumer protection measures have spawned across a number of U.S. states.

Last month in California, Assembly Member Avelino Valencia amended AB 1052 to expand protections for crypto payments and self-custody. Meanwhile, North Dakota’s HB 1447, passed by the Senate on March 18, targets crypto-ATM-related fraud through stricter licensing, daily caps, and reporting rules.