Cryptocurrencies have come a long way. From a time where everyone just thought they were just a bubble and would soon disappear, we are now seeing that cryptocurrencies are here to stay. On October 8, 2020, Attorney General William Barr unveiled the Cryptocurrency Enforcement Framework, compiled by the Cyber-Digital Task Force in the Department of Justice (DOJ). The document is 83 pages long, and it is a play by play of what the U.S. expects from cryptocurrency entrepreneurs. The crypto framework shows how the DOJ plans to tackle emerging cyber threats from the cryptocurrency world.
Exchanges, which the document refers to as virtual asset service providers (VASPs). These are required to comply with laws regardless of their location. This news comes a few days after the U.S. Attorney’s Office for the Southern District of New York (SDNY) announced that it was indicting BitMEX. It is a crypto trading outfit headquartered in Seychelles. When implemented, this framework means that the implications won’t just be felt on exchanges located in the U.S. but worldwide. This means that even though a company doesn’t deal with U.S. customers, they will still be required to follow the framework to stay safe.
The following are key points from this framework:
Blockchain and cryptocurrency are a positive technological force.
DOJ’s framework clearly states that distributed ledger technology (DLT) is a force for good. The framework points out that DLT technology has endless possibilities. These possibilities help people to flourish. It then goes on to provide detailed examples of DLT usage in the federal government. The report shows that the technology was implemented to aid in the modernization of food safety in the FDA with successful results all around.
Categories of crypto crime that will fall under DOJ purview
The report then clearly shows the areas where the U.S. Department of Justice will be more focused on. It will focus on the financial transactions involved in criminal activities. These activities may include using various cryptocurrencies to buy drugs or weapons. The department will also look into crimes such as tax evasion and money laundering. Another focus will be on cryptocurrency theft that has domino effects on the cryptocurrency markets. This means that they will be monitoring the flow of finances on various exchanges to have a better look at criminal activity on these markets.
The DOJ is tracking innovations and inventions in privacy-preserving cryptocurrency.
Most people tend to think that regular cryptocurrency cannot be tracked. The truth is that with enough effort, you can be able to trace how a particular payment has been moving. But other cryptocurrencies such as Monero have an extra layer or two for those who value their privacy a lot. The framework says that they will be tracking cryptocurrencies designed to be anonymous. Because these currencies have an absolute indication of potential criminal activity. The DOJ, therefore, has an eye specifically on technologies that are meant to anonymize people in the crypto markets.
The DOJ focuses on terrorist groups, predefined rogue states, and people using cryptocurrencies on the dark web markets. Most cases cited in the report were of individuals who used cryptocurrencies on the darknet such as DeepDotWeb. Included also are rouge enemy nations such as Iran and North Korea, and terrorist extremists asking for donations. The objective here is to uphold traditional financial order where only those who have obtained cash legally can keep it.
The architecture of The Department of Justice’s relationship with other government agencies in cryptocurrency matters. This section of the report explains the architecture of DOJ’s relationship with other government agencies. It also shows how it works with said agencies to ensure that justice is served. This ranges from FinCEN, the SEC, FATF (Financial Action Task Force), and other offices. Emphasis is placed on the long-standing relationship between the DOJ and other federal offices and others at the state level. This includes the state attorney’s office in New York.
The Wall Street Journal and internal government are heavily referenced.
The report only seems to cite sources from Reuters, the Wall Street Journal, and other internal documents neglecting other more prominent sources at the grass-root level. The only external sources that were quoted came from Binance Academy’s Wiki, which talks about Web 3.0. To that end, the DOJ appears to be unwilling to listen to different perspectives other than that which will validate their plan.
While the DOJ praised distributed ledger technologies, it also sees cryptocurrency as a danger. A massive chunk of the report is designated to crimes, case studies, and specific statutes broken with cryptocurrencies. Although the report starts in a positive light regarding this technology, it’s also coming strongly against its use. More so, with privacy-enhanced cryptocurrencies such as ZCash, Monero, and Dash, people who use them are immediately suspected of criminal activity.
Although not perfect, this crypto framework will go a long way in protecting people from criminal elements looking to use cryptocurrency for evil. It will be a stabilizing feature for all too volatile cryptocurrencies out there as it’s continually refined.