Earlier this 12 months, the U.S. Division of Justice (“DOJ”) launched its extremely anticipated Cryptocurrency Enforcement Framework (the “Framework”). The Framework was developed as a part of the Legal professional Normal’s Cyber-Digital Job Drive, and comprises three sections: (1) Menace Overview; (2) Regulation and Laws; and (3) Ongoing Challenges and Future Methods.
The “Menace Overview” part particulars numerous illicit makes use of of cryptocurrency and highlights how criminals more and more have used cryptocurrency to fund illicit and unlawful actions, together with buying and promoting unlawful medication and firearms, funding terrorist organizations, laundering cash, and fascinating in different unlawful actions on the darkish internet. The Framework additionally discusses how hackers have focused cryptocurrency marketplaces for theft and fraud actions.
The “Regulation and Laws” part of the Framework particulars the present statutory and regulatory framework that DOJ and others have used and may use to manage cryptocurrency. Because the Framework explains, DOJ isn’t the one enforcement actor on this house, and lots of different companies – together with, amongst others, the U.S. Treasury Division, the Securities & Alternate Fee, the Commodity Futures Buying and selling Fee, and the Inner Income Service – have been actively implementing violations by felony cyber actors. Whereas the Framework is usually supportive of a broad, multi-pronged enforcement panorama, it highlights the problem of monitoring and complying with an more and more advanced internet of laws created by these numerous companies.
The third and closing part of the Framework discusses present challenges and techniques for future enforcement. This part notes the inherently decentralized and cross-border nature of cryptocurrency, and the issues it poses for enforcement. Although the worldwide nature of cryptocurrency would possibly complicate investigations, the Framework makes clear it won’t hinder DOJ’s willingness or capability to prosecute instances, stating, “The Division additionally has sturdy authority to prosecute VASPs [Virtual Asset Service Providers] and different entities and people that violate U.S. regulation even when they aren’t positioned inside the US. The place digital asset transactions contact monetary, knowledge storage, or different pc techniques inside the US, the Division usually has jurisdiction to prosecute the actors who direct or conduct these transactions.” The enforcement part emphasizes the Financial institution Secrecy Act (BSA) and Anti Cash Laundering (AML) legal guidelines as major instruments of enforcement, significantly for actors who take care of “anonymity enhanced cryptocurrencies” and expertise that obscures the possession of specific property. The report stresses that obligations to safeguard techniques, defend client knowledge, and correctly preserve buyer data apply not solely to traditional digital asset exchanges, but additionally to peer-to-peer exchanges, kiosk operators, and digital foreign money casinos.
The DOJ launched the Framework at a time when curiosity in cryptocurrency is at an all-time excessive. Bitcoin passed $20,000 recently, and the record-setting degree is a transparent indication of elevated curiosity within the main digital asset. Cryptocurrencies proceed to draw an growing variety of buyers, together with well-known companies and fund managers. Additional, the CME announced plans to increase its cryptocurrency choices by including Ether futures to its present Bitcoin futures, whereas the CBOE recently announced plans to launch indexes tied to varied digital property in early 2021. The Framework represents a transparent indication from the DOJ that it’s centered on cryptocurrency-related crimes. People and corporations in search of funding or publicity to the cryptocurrency market ought to evaluate their compliance obligations in gentle of the Framework, and guarantee any deficiencies are resolved rapidly.
Commentators have famous the Trump administration’s aggressive stance towards cryptocurrency, and the Framework definitely tracks that stance. In fact, it stays to be seen whether or not the Biden administration will proceed to take such an aggressive enforcement posture within the cryptocurrency house. Some commentators have famous that they anticipate that the Biden administration will be different. Notably, Mr. Biden has chosen Gary Gensler to steer his monetary coverage transition staff, and Mr. Gensler has been supportive of cryptocurrencies in past writings.