The Illinois Senate has made a significant move in the realm of cryptocurrency regulation by passing Senate Bill 1797 (SB1797) with a vote of 39 to 17. This regulatory bill, also known as the Digital Assets and Consumer Protection Act, is aimed at protecting investors and curbing fraudulent activities associated with digital assets.
Introduced by Senator Mark Walker in February, SB1797 grants the Illinois Department of Financial and Professional Regulation (DFPR) the authority to oversee digital asset business activity within the state. The bill mandates that all entities involved in digital asset transactions with Illinois residents must register with the state’s financial regulator.
Furthermore, crypto service providers are now required to offer clear and advanced disclosure of user fees and charges, a move designed to enhance transparency and trust in the burgeoning cryptocurrency sector.
Bill SB1797. Source: Ilga.gov
In the words of the bill, “A person shall not engage in digital asset business activity, or hold itself out as being able to engage in digital asset business activity, with or on behalf of a resident unless the person is registered in this State by the Department under this Article […].”
Senator Walker has previously expressed the urgent need to tackle crypto-related fraud in Illinois. He recently stated, “The rise of digital assets has opened the door for financial opportunity, but also for bankruptcy, fraud and deceptive practices. We must set standards for those who have evolved in the crypto business to ensure they are credible, honest actors.”
This push for stronger oversight comes against the backdrop of significant memecoin collapses and insider-led scams that have resulted in substantial losses for retail investors. In March, New York also advanced legislation aimed at establishing criminal penalties to combat cryptocurrency fraud and protect investors.
Memecoin Scams Spark Regulatory Momentum
One of the most notorious instances was the collapse of the Libra token, a memecoin linked to Argentine President Javier Milei. Allegations surfaced that insiders withdrew over $107 million in liquidity, resulting in a staggering 94% price crash and erasing roughly $4 billion in market value.
Libra token crash. Source: Kobeissi Letter
Experts like Anastasija Plotnikova, co-founder and CEO of the blockchain regulatory firm Fideum, assert that insider scams and deceptive practices like rug pulls demand greater regulatory scrutiny. She emphasized, “In my view, these activities should fall firmly within the jurisdiction of law enforcement agencies.”
The latest controversy arose when Hayden Davis, co-creator of the Official Melania Meme and the Libra token, launched another token inspired by the Wolf of Wall Street. Reports indicate that over 82% of this new token’s supply was held by a single entity, culminating in a dramatic price drop of 99% after the token peaked at a $42 million market capitalization.
With the demand for regulatory measures growing, Illinois is paving the way for a more secure crypto environment, aimed at fostering credible, ethical practices within the digital asset realm.
