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 Lawyer Common’s Cyber-Digital Process Pressure, and incorporates three sections: (1) Risk Overview; (2) Legislation and Rules; and (3) Ongoing Challenges and Future Methods.
The “Risk Overview” part particulars varied 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 interesting in different unlawful actions on the darkish internet. The Framework additionally discusses how hackers have focused cryptocurrency marketplaces for theft and fraud actions.
The “Legislation and Rules” part of the Framework particulars the prevailing statutory and regulatory framework that DOJ and others have used and may use to control cryptocurrency. Because the Framework explains, DOJ shouldn’t be the one enforcement actor on this house, and plenty of different businesses – together with, amongst others, the U.S. Treasury Division, the Securities & Alternate Fee, the Commodity Futures Buying and selling Fee, and the Inside Income Service – have been actively implementing violations by prison cyber actors. Whereas the Framework is mostly supportive of a broad, multi-pronged enforcement panorama, it highlights the issue of monitoring and complying with an more and more complicated internet of rules created by these varied businesses.
The third and closing part of the Framework discusses present challenges and methods 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 may complicate investigations, the Framework makes clear it won’t hinder DOJ’s willingness or skill 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 situated inside america. The place digital asset transactions contact monetary, knowledge storage, or different pc techniques inside america, 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, notably for actors who cope with “anonymity enhanced cryptocurrencies” and know-how that obscures the possession of explicit property. The report stresses that obligations to safeguard techniques, shield shopper knowledge, and correctly keep buyer data apply not solely to standard digital asset exchanges, but in addition 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 stage is a transparent indication of elevated curiosity within the main digital asset. Cryptocurrencies proceed to draw an rising variety of traders, together with well-known companies and fund managers. Additional, the CME announced plans to broaden its cryptocurrency choices by including Ether futures to its present Bitcoin futures, whereas the CBOE recently announced plans to launch indexes tied to numerous digital property in early 2021. The Framework represents a transparent indication from the DOJ that it’s centered on cryptocurrency-related crimes. People and firms in search of funding or publicity to the cryptocurrency market ought to evaluation their compliance obligations in mild 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 count on that the Biden administration will be different. Notably, Mr. Biden has chosen Gary Gensler to steer his monetary coverage transition crew, and Mr. Gensler has been supportive of cryptocurrencies in past writings.