US Justice Dept Publishes Cryptocurrency Enforcement Framework

The framework provides a detailed threat overview, cataloging the three categories into which most illicit uses of cryptocurrency typically fall.

The US Attorney General’s Cyber-Digital Task Force has produced a cryptocurrency enforcement framework, providing a comprehensive overview of the emerging threats and enforcement challenges associated with the increasing prevalence and use of cryptocurrency.

It also details the relationships the DOJ (Department of Justice) has formed with regulatory and enforcement partners within the US government and around the world, and outlines the DOJ’s response strategies.

The report provides a “cohesive, first-of-its kind framework for those seeking to understand federal enforcement priorities in this growing space.” said Attorney General William Barr, thanking the Cyber-Digital Task Force.

The FBI welcomed the framework, “As this Enforcement Framework describes, we see criminals using cryptocurrency to try to prevent us from ‘following the money’ across a wide range of investigations, as well as to trade in illicit goods like criminal tools on the dark web,” said FBI Director Christopher Wray.

“For example, the cyber criminals behind ransomware attacks often use cryptocurrency to try to hide their true identities when acquiring malware and infrastructure, and receiving ransom payments.”

The framework provides a detailed threat overview, cataloging the three categories into which most illicit uses of cryptocurrency typically fall: (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.

It also explores the various legal and regulatory tools at the US government’s disposal to confront the threats posed by cryptocurrency’s illicit uses, highlighting the growing partnerships between the DOJ and the SEC (Securities and Exchange Commission0, CFTC (Commodity Futures Commission), and US Treasury agencies, among others, to enforce federal law in the cryptocurrency space.

The Framework also includes a discussion of the ongoing challenges the US government faces in cryptocurrency enforcement, such as with respect to business models employed by certain cryptocurrency exchanges, P2P platforms, kiosks, and casinos.

It also warns against the use of ‘anonymity enhanced cryptocurrencies’ – such as Monero, Dash and Zcash – saying the use of these cryptocurrencies may undermine the AML/CFT controls used by financial firms to detect suspicious activity.

“The Department considers the use of [anonymity enhanced cryptocurrencies] to be a high-risk activity that is indicative of possible criminal conduct.”

It also covers challenges related to activities like ‘mixing’, ‘tumbling’, ‘chain hopping’, and certain instances of jurisdictional arbitrage.

The Cryptocurrency Enforcement Framework is available here.

Additional reporting from CoinDesk.