crypto: New York AG raises red flag on cryptos, industry highlights the need for regulations

Amid the rising buzz over the crypto regulations across the globe, the Attorney General (AG) of New York has raised red flags against the risks of crypto trading and mining.

New Yok AG Letitia James has warned the investors over these risks as the state pursues efforts to ban proof-of-work (PoW) crypto mining.

James stated that the investors have lost billions of dollars and crypto assets are subject to extreme volatility and unpredictable price swing, making them among the most high-risk investments in the market.

The local AG was referring to the collapse of Terra’s native token LUNA, which wiped out more than $50 billion in less than 100 hours last month, after its sister concern and algorithmic stablecoin USD Terra (UST) was ‘depegged’ from its value.

She said tha virtual digital assets, from the newbies to old behemoths- have ample risks associated with them and have dived sharply from their peaks.

If the numbers are to be believed, then James does have a point as the total marketcap of the crypto industry has plunged to $1.25 trillions from more than $3 trillion, wiping out close to $1.8 trillion in merely a few weeks.

Commenting on her opinion, Hitesh Malviay, Founder, IBC capital and its blockchain said that she is not completely wrong in saying that the Terra debacle was one of the biggest debacles in modern financial history.

“However, outright ban or blanket prohibition of the crypto assets is not a solution,” he added. “Global regulatory framework is the need of hours, which must address the various needs of the consumers and protect their interests too.”

The latest hammering of crypto tokens, lower liquidity, high cost of transactions and instability in some stablecoins are adding weightage to her point.

The alert came as the New York State Senate passed a bill banning PoW mining within the state that uses non-renewable power through the moratorium.

If the bill is approved by Governor Kathy Hochul, mining operations will be prohibited, and those with licenses to operate will not be able to renew their permits.

Sharat Chandra, VP- Research & Strategy, EarthID said that it’s prudent for regulators to highlight the risks associated with high-risk assets such as tech and crypto-assets.

“The correlation of bitcoin and equity markets is at an all-time high. If one zooms out and looks at ten years, crypto assets have outperformed even the S&P. Investors should have a long-term view and diversify their portfolios,” he said.

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