The United States Department of Justice is focusing its attention on the crypto-verse and how to control that ecosystem. On October 8, 2020, the US Attorney General released a report talking about the dangers associated with the adoption of cryptocurrencies and the expectations of the DOJ in this regard.
The “Cryptocurrency Enforcement Framework” is an 83-page document published by the Attorney General’s Cyber Digital Task Force. The 20+ person team believes cryptocurrencies are risky because they make it easier for criminals to transfer funds and evade authorities.
The Cyber Digital Task Force thinks the report could serve as a reference for the Department of Justice and other agencies to adapt their procedures under the recommendations and warnings presented in it.
The document has 3 parts:
Part I: The Problem With Cryptocurrency
The first part catalogs the crimes that are associated with cryptocurrencies. According to the Cyber Digital Task Force, there are three main groups or categories in which the illicit use of cryptocurrency can be framed:
- Financial transactions associated with the commission of crimes: For example, financing terrorism, buying supplies for terrorist groups, extortion, etc.
- Money laundering and the shielding of legitimate activity from tax, reporting, or other legal requirements: For example, what our good old John McAfee is accused of.
- Crimes directly implicating the cryptocurrency marketplace itself: For example, fraud, cryptojacking, phishing attacks, etc.
Part II: The Efforts to Combat the Illicit Use of Cryptocurrency
The second part talks about the current efforts being made by law enforcement to counter these threats. The DoJ, SEC, CFTC, FBI, CIA, OFAC, OCC, IRS, FinCEN, etc., are all working together to prevent the use of cryptocurrency… by criminals, of course.
They explain that FinCEN’s efforts have been particularly crucial in the fight to provide greater transparency in the landscape.
As an example, the taskforce mentioned an investigation that found Ripple to be acting as an unregistered Money Service Business because of its XRP sales program.:
Parallel investigations by the Department of Justice and FinCEN found that Ripple Labs willfully violated several requirements of the BSA by acting as an MSB and selling XRP without registering with FinCEN and by failing to implement and maintain an adequate AML program. Ripple Labs entered into a settlement agreement that resolved possible criminal charges and required the entity to forfeit $450,000.
Part III: The Future
The third part discusses what the DOJ has in mind for the near future. The team explains they will look for mechanisms to control the activities of some services that have recently boomed in the crypto ecosystem: Exchanges, casinos, kiosks, anonymization services like mixers or tumblers, exchanges with little or no KYC, etc.
The document also has a positive side. The DoJ recognized that cryptocurrencies could play an important role in changing the global financial landscape.
“Indeed, for cryptocurrency to realize its truly transformative potential, it is imperative that these risks be addressed.
However, the task force vowed for more cooperation and clarity to establish a safer environment where cryptocurrencies are used for good things.
The other side of the coin
This report comes just weeks after a scandal involving many global-scale banks being soft with criminal activity causing trillions of dollars in damages. Also, Messari has found that for every dollar in crypto used by criminals, $800 are moved via the traditional financial system, and Interpol said cash is still the king among criminals.
So, it seems crypto is not as big in the criminal world as cash… But that is material for another report.