U.S. Department of Justice Releases Cryptocurrency Enforcement Framework
On October 8th, the U.S. Department of Justice (DOJ) released a cryptocurrency enforcement framework in response to the "emerging threats" associated with the continued adoption of Bitcoin and related technologies.
Attorney General William Barr, who runs a Cyber-Digital Task Force, commented on the publication:
Cryptocurrency is a technology that could fundamentally transform how human beings interact, and how we organize society. Ensuring that use of this technology is safe, and does not imperil our public safety or our national security, is vitally important to America and its allies.
Those involved in the task force shared sentiments similar to what was expressed by the Attorney General. FBI Director Christopher Wray further commented that the Bureau is seeing cryptocurrencies in a growing number of digital crimes, such as ransomware and dark web payments for illicit goods.
The 83-page report titled “Cryptocurrency: An Enforcement Framework” covers a variety of threats pertaining to cryptocurrencies. The threats have been classified into three categories: "(1) financial transactions associated with the commission of crimes; (2) money laundering and the shielding of legitimate activity from tax, reporting, or other legal requirements; and (3) crimes, such as theft, directly implicating the cryptocurrency marketplace itself."
The framework also explores the "various legal and regulatory tools" the government currently has at its disposal, along with growing threats pertaining to the regulation of cryptocurrencies.
Growing threats, the DOJ wrote, include Bitcoin mixer technologies, decentralized applications, and jurisdictional arbitrage enabled by inconsistent laws around the world. Privacy-focused cryptocurrencies ZCash, Dash, and Monero were mentioned specifically as likely mediums for criminals to enact crimes.
"The framework [includes] a discussion of the ongoing challenges the government faces in cryptocurrency enforcement - particularly with respect to business models (employed by certain cryptocurrency exchanges, platforms, kiosks, and casinos), and to activity (like “mixing” and “tumbling,” “chain hopping,” and certain instances of jurisdictional arbitrage) that may facilitate criminal activity."
A Coordinated Push to Regulate Bitcoin
The DOJ's move to release an enforcement framework comes hot on the heels of a series of other moves made by other regulatory agencies.
The European Union's Europol recently released its own report indicating that it sees Bitcoin mixer technologies like CoinJoin and privacy coins like Monero as a risk to public safety. The organization further mentioned that OpenBazaar, a cryptocurrency-focused marketplace, may also be a way for "criminals" to sell their "illegal goods."
This came shortly after the Financial Action Task Force, a supernational anti-money laundering group, and the United States Internal Revenue Service made moves to further regulate cryptocurrencies.
There have also been specific moves to regulate the space.
BitMEX was recently charged by the U.S. Commodities and Futures Trading Commission over potential violations of derivatives rules and anti-money laundering laws. Warrants are out for the company's three co-founders, one of whom has already been apprehended by authorities.
The U.S. Securities and Exchange Commission (SEC) recently brought evidence to light that John McAfee was paid over $22 million in cryptocurrencies to promote ICOs without disclosing his conflict of interest. He was apprehended in Spain for evading taxes pertaining to those promotions and his other streams of income.
Other specific moves include further charging of securities violations of U.S. ICO providers and the U.K. Financial Conduct Authority banning cryptocurrency derivatives for retail users.
Considering the timing and extensive nature of these moves, it is likely that these regulatory agencies and nations are working together on ironing out what they see as kinks in a rapidly growing industry.