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In addition to the turmoil in the cryptocurrency industry over the past year, the DOJ has been more aggressive in pushing for criminal enforcement actions regarding cryptocurrencies and other digital assets.
DOJ’s priorities come as no surprise to observers of regulatory activity in this area. Last year’s announcements by the White House and DOJ pointed toward increased resources for digital asset enforcement, along with increased prosecutorial firepower aimed at bad behavior in the cryptocurrency industry.
DOJ and White House enforcement priorities are increasing risk for financial institutions involved in transmitting digital assets, prompting internal departments to stay ahead of compliance marches.
Reconciliation of digital assets
On September 16, 2022, DOJ announced a new nationwide digital asset coordinator network of federal prosecutors as part of its response to Joe Biden’s March 2022 executive order.
The network consists of more than 150 federal prosecutors from federal attorneys’ offices nationwide and various DOJ offices in Washington, DC. These experts develop best practices for investigating and prosecuting suspected digital asset-related crimes.
In a blockchain world where new tokens, coins, and other digital assets are created and exchanged daily, the DOJ believes directing more prosecution resources to develop expertise in this area will help keep crypto criminals safe. We believe it will help us better identify and stop them. Similar prosecutor networks have been successfully deployed in areas such as intellectual property crime and counter-terrorism.
The network will work with DOJ’s National Cryptocurrency Enforcement Team, established in late 2021, to strengthen prosecutorial resources and develop expertise in investigating and prosecuting cryptocurrency crimes.
strategic priorities
In addition to this initiative, DOJ has proposed three regulatory and legislative priorities to combat cryptocurrency crime.
A top priority is to amend the Data Loss Prevention Act for financial institutions to include digital assets. This makes it a criminal offense for an officer or agent of a financial institution to provide information to a customer when records are sought by law enforcement. By including digital assets in data loss prevention laws, enforcement authorities will make it more difficult for customers to evade detection, gaining another arrow in their quiver of investigations.
A second priority is to strengthen penalties and expand the application of criminal laws governing the operation of unlicensed money transfer businesses. The proposal would give the Department of Justice and other federal enforcement agencies the power to regulate and prosecute digital asset exchanges and other financial institutions involved in cryptocurrency transmissions.
DOJ’s third priority is to extend the statute of limitations to 10 years for all crimes involving the transfer of digital assets. This will allow DOJ to systematically investigate complex cryptocrime allegations.
Combined with the establishment of the DAC Network, these priority proposals will strengthen DOJ’s arsenal of investigating and prosecuting suspected digital asset crimes while increasing enforcement risk for financial institutions involved in transmitting digital assets.
White House priorities
In parallel with the DOJ, the White House announced additional priorities for regulatory and enforcement agencies in the digital asset industry. For the Securities and Exchange Commission and the Commodity Futures Trading Commission, the Biden administration has encouraged aggressive investigations and enforcement actions into alleged illegal activity in the digital asset space.
SEC Chairman Gary Gensler has already filed or settled more than 30 lawsuits related to cryptocurrencies, and we expect more to come. As for the Treasury, the White House has pledged to dedicate more resources to identifying, tracking and analyzing risks associated with digital asset markets, and will complete an illicit financial risk assessment on decentralized finance by the end of February. and a fungible token by July.
The expansion of enforcement resources to combat alleged digital asset crimes shows that the law is going after cryptocurrency villains. As the DOJ expands the ability of federal prosecutors and federal law enforcement agencies to understand and police the digital asset industry, the cryptocurrency industry will understand the relevant laws and regulations and the risks that may arise from DOJ or White House proposals. Compliance must be strengthened by anticipating certain future changes. .
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., publishers of Bloomberg Law and Bloomberg Tax, or their owners.
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Andrew S. Boutros Regional Chairman of Dechert’s White Collar Practice. A former federal prosecutor, he handles white-collar matters, internal and cross-border investigations, and complex litigation. He is also a Law Lecturer at the University of Chicago School of Law.
David N. Kelly Senior Partner at Dechert and former U.S. Attorney for the Southern District of New York. He has over 30 years of experience in commercial litigation, federal securities, grand jury investigations, and congressional investigations.
John R. (“Jay”) Schleppenbach An attorney in Dechert’s White Collar Practice, representing large corporations in internal investigations and litigation matters. He is a former appellate prosecutor at Northwestern.He also coached Law’s International Arbitration Moot Court team.
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