DOJ Begins Expected Crackdown on Crypto with New Enforcement Team

The Biden administration’s crackdown on cryptocurrencies has officially begun. On October 6^th, the United States Department of Justice (DOJ) announced the creation of the National Cryptocurrency Enforcement Team (NCET) a group with the primary goal of better investigating criminal activities related to cryptocurrency misuse while increasing prosecution rates against those responsible for these improprieties. According to a DOJ press release, NCET will be focusing on “crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors” while also assisting in the tracking and recovery of assets lost due to fraud and extortion.²

            The formation of the NCET comes shortly after crucial groundwork was laid by the Justice Department during the tenure of former American President Donald Trump. A publication released by the Department just over one year ago titled “Cryptocurrency: An Enforcement Framework” outlined the true scope of the emerging threats that law enforcement have begun and will continue to face in the near future with respect to crypto-related criminal activity. Then-Attorney General William Barr, asserted that “Cryptocurrency is a technology that could fundamentally transform how human beings interact, and how we organize society.  Ensuring that use of this technology is safe, and does not imperil our public safety or our national security, is vitally important to America and its allies.”¹ In spite of the significant disparities in convictions held by ex-President Trump and current Commander in Chief Joe Biden, it is clear that aligning the standards of oversight of this emerging market with that of anti-money laundering and terror financing directives has remained paramount.

            NCET will operate in the criminal division of the DOJ and report directly to Assistant Attorney General Kenneth A. Polite Jr. The team will reportedly draw on the expertise of the DOJ’s heralded money laundering, asset recovery, and computer crime sections. Further expanding its reach, NCET will also be working with outside agencies that include regulatory staples such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Department of Treasury. It remains to be seen whether or not the freshly minted agency will expand its information-sharing capacities across international borders however. The DOJ’s press highlights several of NCET’s key goals as follows:

• Investigate and prosecute cryptocurrency cases, comprising a central part of a nationwide enforcement effort to combat the use of cryptocurrency as an illicit tool.
• Develop strategic priorities for investigations and prosecutions involving cryptocurrency, in consultation with the USAOs, Department components, and investigative agencies involved in cryptocurrency investigations.
• Identify areas for increased investigative and prosecutorial focus, including professional money launderers, ransomware schemes, human traffickers, narcotics traffickers, and financial institutions working with cryptocurrency.
• Build and enhance relationships with cryptocurrency focused AUSAs and prosecutors with other Department litigating components and offices to pursue cryptocurrency investigations and prosecutions.
• Develop and maintain relationships with federal, state, local, and international law enforcement agencies that investigate and prosecute cryptocurrency cases.
• Train and advise federal prosecutors and law enforcement agencies in developing investigative and prosecutorial strategies. Such training and advice will include providing guidance concerning search and seizure warrants, restraining orders, criminal and civil forfeiture allegations, indictments, and other pleadings.
• Support the coordination and sharing of information and evidence among law enforcement offices to maximize the effectiveness of the Department’s investigations, prosecutions, and forfeitures involving cryptocurrency.
• Collaborate and build relationships with private sector actors with expertise in cryptocurrency matters to further the criminal enforcement mission³

            The fact that the DOJ will be pooling their resources to allow NCET to garner key intel from multiple established and successful divisions of the department is encouraging, but there are some potential downsides to this undertaking as well. One of the most attractive aspects of the cryptocurrency market is its lack of stringent regulation, with many fearing that the initiation of overly aggressive enforcement could alienate crypto users and traders using these platforms legitimately (i.e. not to launder illicit funds or scam other users). Such strict oversight could effectively stifle a thriving and rapidly expanding industry. Jackson Mueller, director of policy & government affairs at digital asset firm Securrency, claims that the Biden administration’s actions have already demonstrated that his administration is leaning towards “enforcement” over cooperation in this regard. He claims that the formation of NCET itself signals that preference instead of one that encourages engagement and cooperation from platform founders and industry leaders coming together to collectively manage their own interests with respect to financial security. On the upside, if the US government is able to effectively target and single out bad actors, this could prove a boon to the industry. It all depends on NCET’s ultimate execution of its lofty goals.

Citations

1. “Attorney General William P. Barr Announces Publication of Cryptocurrency Enforcement Framework.” The United States Department of Justice, 22 Mar. 2021. 
2. Austria, R. “Department of Justice Announces National Cryptocurrency Enforcement Team.” JD Supra, 15 Oct. 2021. 
3. “Deputy Attorney General Lisa O. Monaco Announces National Cryptocurrency Enforcement Team.” The United States Department of Justice, 6 Oct. 2021.