Illinois cracks down on crypto scams with new laws

Illinois Governor JB Pritzker signed two bills creating first-of-their-kind cryptocurrency consumer protections in the Midwest.

The Digital Assets and Consumer Protection Act establishes regulatory oversight and the Digital Asset Kiosk Act targets scam prevention. Illinois consumers also lost $272 million to crypto fraud in 2024.

Illinois tackles $272 million crypto fraud crisis with new legislation

FBI data reveals Illinois consumers lost $272 million in cryptocurrency fraud cases during 2024 alone. This figure makes crypto fraud the most common type of financial fraud affecting Illinois residents over the past year. The losses highlight the urgent need for protective measures as more people fall victim to cryptocurrency-related scams.

Governor Pritzker responded to this crisis by signing the Digital Assets and Consumer Protection Act (SB1797) and Digital Asset Kiosk Act (SB2319). These bills create the first comprehensive cryptocurrency consumer protections in the Midwest region. The legislation addresses growing concerns about fraudulent activities in the digital asset space.

The timing coincides with federal deregulation efforts that have reduced consumer protections at the national level. Illinois lawmakers noted that the Trump Administration has stripped the IRS of authority to regulate decentralized crypto brokers. Federal legislation has been driven primarily by industry lobbying rather than consumer protection priorities.

Illinois Department of Financial and Professional Regulation (IDFPR) Secretary Mario Treto Jr. emphasized that these initiatives modernize consumer protection frameworks. The legislation prioritizes safety and security for Illinois residents while creating transparent marketplace conditions. State lawmakers designed the bills to keep bad actors out of the cryptocurrency market and also support legitimate businesses.

Crypto businesses face regulatory framework requirements

The Digital Assets and Consumer Protection Act grants IDFPR authority to regulate and supervise digital asset exchanges and other cryptocurrency businesses operating in Illinois. Companies must now comply with customer protection standards that are similar to traditional financial services regulations. This includes mandatory investment disclosures, customer asset safeguards, and customer service standards.

Cryptocurrency businesses need to have adequate financial resources in order to operate effectively in the new landscape. Businesses need to have comprehensive procedures and frameworks for managing top-level operational risks like cybersecurity violations, fraud detection, and money laundering.

The law enforces strong consumer protection on a level with those of traditional banking and investment products. Companies are required to institute customer asset protection and issue transparent disclosure materials on investment risk. Customer service standards provide customers with proper advice when something is wrong with their digital asset purchases.

Firms have until July 1, 2027, to be registered with the IDFPR and meet all regulations. The time period provides existing firms with time to make changes to operations and new firms with a chance to establish compliant systems from the ground up. Registration includes extensive reporting requirements for business practices and customer protection policies.

Kiosk operators must register with 18% fee caps and fraud protections

The Digital Asset Kiosk Act imposes some obligations on cryptocurrency kiosk operators in Illinois. All such operators must register with IDFPR and file comprehensive reports of every kiosk location in the state. The registration program helps regulators monitor kiosk activity and ensure compliance with consumer protection laws.

Crypto kiosk transaction fees cannot go beyond 18% under new regulations, which cap fees to avoid consumers being charged excessive rates when they are not used to cryptocurrency prices. The cap is placed to ensure cost transparency and yet provide consumers with profitable business models.

New users feel their daily transaction limits of $2,500 at cryptocurrency kiosks are in place to prevent substantial losses through fraud. The limit particularly protects first-time users who may be tricked by scammers into investing large amounts of money initially. The daily limit allows genuine users to access services while limiting exposure to potential fraud.

Operators of kiosks have to provide complete refunds to scam victims who are new users of their machines. The refund mandate puts operators in charge of having good fraud prevention and detection systems. The protection is for new users who are most vulnerable to cryptocurrency scams.

Certain consumer protections like fraud victim refunds are effective on signing into law by the governor. The immediate impact protects current kiosk customers as operators prepare for full compliance measures.

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