Manhattan DA Pushes Criminal Penalties for Unlicensed Crypto Operators
TL;DR
Manhattan DA Alvin Bragg is pushing the CRYPTO Act to make unlicensed crypto operations a criminal offense with jail time, arguing civil fines fail to deter illegal activity. The bill would escalate penalties to felonies for large-scale operations, addressing what prosecutors call a 'shadow financial system' enabling crime.
Key Takeaways
- •The CRYPTO Act would impose criminal penalties (misdemeanors to felonies) on unlicensed crypto businesses, with potential prison sentences up to 15 years.
- •Prosecutors argue current civil fines are insufficient to deter crypto-facilitated crime like money laundering, creating a regulatory enforcement gap.
- •New York currently has only civil penalties for unlicensed crypto operations, while 18 other states already criminalize such activities.
- •Critics warn unclear regulations combined with criminal penalties could push companies out of New York or make the industry overly conservative.
- •The bill targets business operators, not individual crypto users or DeFi protocols, focusing on enforcement of existing licensing requirements.
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New York prosecutors are pressing lawmakers to turn unlicensed crypto operations into a jailable offense, noting that civil fines alone have failed to deter a growing underground economy fueled by crypto.
Introduced by Manhattan District Attorney Alvin Bragg and New York State Senator Zellnor Myrie on Thursday, the CRYPTO Act—short for Cryptocurrency Regulation Yields Protections, Trust, and Oversight—would impose criminal penalties on virtual currency businesses operating without state licenses, according to a Thursday statement.
“Crypto is the go-to means for bad actors to move and hide the proceeds of crime.” – D.A. Bragg. Watch here to learn more about our new bill with @SenatorMyrie to combat the use of cryptocurrency to commit crimes and launder proceeds. pic.twitter.com/G3JMKShqfC
— Alvin Bragg (@ManhattanDA) January 15, 2026
The bill would raise violations that currently carry only civil fines to criminal offenses with graduated penalties ranging from a Class A misdemeanor to a Class C felony for businesses handling $1 million or more in cryptocurrency within one year.
A Class C felony conviction carries a maximum sentence of five to 15 years in state prison, according to the statement.
Bragg said the expansion of crypto has enabled “a shadow financial system” that allows criminals to move and conceal illicit funds with ease.
“It is long past time for businesses that operate without a virtual currency license and flout due diligence requirements to face criminal penalties,” the DA said in the statement.
The measure addresses a growing enforcement gap as crypto increasingly facilitates criminal activity while unlicensed operators face minimal consequences.
New York and crypto
Unlike federal law, which allows up to five years in prison for unlicensed money transmission, New York currently imposes only civil penalties on violators, with eighteen other states already criminalizing unlicensed crypto operations.
Speaking at New York Law School on Wednesday, Bragg framed crypto enforcement as a second-term priority alongside guns and shoplifting, warning legislators that criminals exploit regulatory blind spots to launder proceeds from guns, drugs, and fraud.
"Nothing new is being outlawed. Crypto is not banned, DeFi is not banned, and users are not being targeted. The rules about who needs a license already exist. What changes is the consequence for ignoring those rules," Nicolai Søndergaard, Research Analyst at Nansen, told Decrypt.
Søndergaard warned that introducing criminal penalties while regulatory boundaries remain unclear could push companies to act conservatively or avoid New York altogether, making the industry more institutional and “more cautious, more bank-like,” even as it cleans up unlicensed operators and reduces regulatory arbitrage.
Last year, former New York City Mayor Eric Adams called for scrapping New York’s BitLicense at a major Bitcoin conference in May, saying the regime had become a barrier to crypto innovation and investment.
Introduced in 2015, the BitLicense requires crypto businesses operating in New York State to meet strict compliance standards aimed at consumer protection, with application and compliance costs that can run from roughly $5,000 to well over $100,000.
Adams, who famously converted his first three mayoral paychecks into Bitcoin and Ethereum in 2022, recently came under scrutiny over NYC Token, a Solana-based crypto he promoted that briefly hit a $600 million market cap before crashing amid allegations that a linked wallet siphoned nearly $1 million in liquidity.