How will the U.S. Department of Justice’s new crypto compliance team change the game for industry players? Will it change for better or for worse?

On October 6, the Ministry of Justice, or The United States DOJ announced the creation of a specialized unit, the National Cryptocurrency Enforcement Team (NCET), responsible for tracking down criminal use of digital assets and cryptocurrency infrastructure, as well as tracking and restoring illicitly acquired cryptocurrencies.

The move continues pressure from US authorities to disrupt corners of the crypto ecosystem that are believed to facilitate illegal activities such as ransomware attacks. What does the government’s increased regulatory enforcement of cryptocurrencies consider to be the largest digital asset area?

Grouping of experience in cryptocurrencies

The new unit will operate on the principles formulated almost exactly a year ago in the DOJ’s Cryptocurrency Enforcement Framework. The document e.g. Reaffirms the Department’s extensive responsibility for criminal activities that affect financial or data storage infrastructure in the United States.

How will the U.S. Department of Justice’s new crypto compliance team change the game for industry players?  Will it change for better or for worse?
How will the U.S. Department of Justice’s new crypto compliance team change the game for industry players? Will it change for better or for worse?

In addition to investigating its own cases and supporting the efforts of U.S. prosecutors across the country, NCET will encourage all relevant federal, state and local law enforcement agencies to work together to tackle cryptocurrency-related crime. The team is also charged with training and advising law enforcement officers on cryptocurrency matters and developing investigative strategies.

The agents for the new task force will come from both the money laundering and asset recovery and cybercrime and intellectual property departments of the DOJ, as well as various US law firms.

Speaking to Cointelegraph, Kevin Feldis, a partner in law firm Perkins Coie, described MLARS and CCIPS as “highly respected components of the Justice Department” whose members are “well versed in handling cross-border investigations and in coordinating with law enforcement agencies around the world. “

New tool for existing guidelines

NCET is expected to direct its enforcement efforts towards illegal or unregistered money services, ransomware payment infrastructures, and various other markets where digital money encounters criminal activity. None of this is particularly new, and the Justice Department is merely putting together a more agile coordinated mechanism to combat cybercrime and recover potentially stolen funds.

The announcement also expands the range of developments that illustrate the Biden government’s commitment to law enforcement attitudes towards cybercrime, including criminal activity facilitated by cryptocurrencies.

Jackson Mueller, director of politics and government at digital asset firm Securrency, told Cointelegraph:

This announcement should come as no surprise to those of us who are tracking the Biden government and its efforts, whether through federal financial regulators, the Treasury Department, the President’s Working Group on Stablecoins, and others, to enforce heightened controls and enforcement measures against the ecosystem.

Mueller added that the advent of NCET suggests that the government prefers policies that focus more on law enforcement than the focus on compromise and collaboration that many in the industry would prefer.

Michael Bahar, President of Cybersecurity Practice at global law firm Eversheds Sutherland, traces the roots of the NCET initiative back to Joe Biden’s Executive Order of May 2021which made it a top priority to use the full reach of the federal government’s agencies and resources to protect the country’s computer systems from cyberattacks. Bahar further commented:

As part of this government-wide effort, the U.S. Department of Justice is leveraging its decades of money tracking and anti-money laundering experience to capture the perpetrators and return money, for example to undermine financial incentives for criminals to use ransomware in the first place .

Ron Brisé, a government affairs and lobbying attorney with the Gunster law firm, said that The Justice Department “connects the dots across its sections to provide a more centralized approach to cryptocurrency-related investigations and law enforcement.”. Brisé added that you wouldn’t be surprised if certain individual states replicated the federal initiative and set up their own teams to enforce cryptocurrencies in the near future.

More general implications

Of course, eradicating bad actors from the crypto sector who are giving the entire industry a bad name in the eyes of the public (and very often in the eyes of lawmakers) is a noble endeavor. Nevertheless, There is also cause for legitimate concern for those crypto players who act in good faith and invest significant resources in compliance, i.e. the vast majority of industry participants.

It is not difficult to imagine a scenario in which an overly aggressive application could place an additional burden on legitimate actors.

Kevin Feldis of Perkins Coie believes that the Justice Department’s focus on increased criminal investigation and the development of the ability to recover illicit cryptocurrency revenues is also likely to mean increased government scrutiny across the industry.. Feldis added:

The legal and regulatory landscape is still evolving, and investing in compliance and being a good crypto corporate citizen will likely serve industry players well given this increased focus on government enforcement by the DOJ, SEC, and others.

At the same time, the kind of knowledgeable enforcement skilled enough to target criminals without unduly burdening the good guys could be a boon to the industry. Having all of the Justice Department’s cryptocurrency staff members in a well-coordinated force could also result in the NCET giving up its enforcement powers in some way.

Ron Brisé de Gunster points out that the creation of a specialized unit for cryptocurrencies within the Justice Department could be viewed as beneficial overall. He commented:

From a broader perspective, if there is recourse for those whose digital funds are stolen, both consumers and crypto companies will become more confident.

In fact, the crypto space will become a safer place for legitimate financial activity if the NCET accomplishes its stated mission rather than creating unnecessarily wide networks.

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