DOJ Releases Framework for Cryptocurrency Enforcement

DOJ Releases Framework for Cryptocurrency Enforcement

On October 8, 2020, the U.S. Department of Justice (“DOJ”) released the publication “Cryptocurrency: An Enforcement Framework,” (“Framework”) which described emerging threats and enforcement challenges associated with cryptocurrency. DOJ’s Cyber-Digital Task Force produced the Framework to highlight important relationships DOJ has built with other domestic and international regulatory and enforcement partners, and its strategic response to address emerging issues concerning cryptocurrency and the “blockchain” or “distributed ledger” technology underlying it.  The Framework’s stated goal is to ensure that cryptocurrencies and associated technologies are safe and do not imperil public safety or national security. While DOJ explicitly recognizes cryptocurrency’s potential in the Framework, it also outlines both threats and illicit opportunities that cryptocurrency provides for nefarious actors.  The Framework is divided into three parts.

Part I

Part I of the Framework begins with an overview of potential threats presented by use of cryptocurrency, and a recognition of the unique challenges it presents due to inherent features that can enable illicit use (decentralized operation and a high degree of anonymity). While also outlining cryptocurrency’s legitimate uses (e.g., enabling worldwide transfers of value without utilizing a financial intermediary, thereby minimizing transaction costs), the report goes on to identify three categories into which illicit uses of cryptocurrency typically fall:

  • financial transactions associated with the commission of crimes, such as buying and selling drugs or weapons on the dark web, leasing servers to commit cybercrimes, or soliciting funds to support terrorist activity;

  • money laundering and unlawfully shielding legitimate activity from taxes, reporting obligations, or other legal requirements; or

  • crimes directly implicating the cryptocurrency marketplace, such as stealing cryptocurrency from exchanges through hacking, or defrauding investors through the use or promise of cryptocurrency.