The Illinois Senate has approved a groundbreaking bill aiming to regulate crypto businesses and curb fraud in the state. Dubbed the “Digital Assets and Consumer Protection Act” (SB 1797), it was passed with a 39-17 vote on April 10th. The act, introduced by Senator Mark Walker, sets out to bring crypto companies under stricter scrutiny by requiring registration with the Illinois Department of Financial and Professional Regulation before operating in the state. Crucially, SB 1797 mandates that crypto firms register their services for Illinois residents even if they operate from another state. Key provisions include: mandating full fee transparency, informing users about asset insurance status, and explaining potential risks like fraud losses, outages, or security breaches. Further, the bill targets shady exchange practices: platforms listing crypto tokens must assess security risks, disclose potential conflicts of interest, conduct regular reviews to ensure token suitability for listing, and report manipulation, price rigging, and insider-driven scams before adding any token. It also mandates secure asset storage separate from company funds, prohibiting their use for lending or other purposes without explicit customer consent. In the event of a bankrupt company, user assets would be legally protected and treated as trust property, not business holdings. The bill also establishes a framework for complaint handling and customer service, requiring covered firms to provide toll-free helplines and clear dispute resolution processes for fraud reporting. This comes amid growing concerns over crypto scams in Illinois, particularly high losses in 2023, which have reached nearly 2,000 complaints according to FBI data. Similar consumer protection measures are emerging across other US states, with California’s AB 1052 expanding protections for crypto payments and self-custody and North Dakota’s HB 1447 targeting crypto-ATM-related fraud through stricter licensing, caps, and reporting rules.