What to Know About the DOJ’s National Cryptocurrency Enforcement Team – JD Supra

The Volkov Law Group
Matt Stankiewicz, Partner at The Volkov Law Group, rejoins us to discuss the DOJ’s cryptocurrency enforcement efforts.  
In early October, U.S. Department of Justice (“DOJ”) Deputy Attorney General Lisa Monaco announced the creation of the National Cryptocurrency Enforcement Team (“NCET”).  The NCET will handle the Department’s investigations and enforcement actions relating to cryptocurrency and virtual assets, which has seen rapidly growing regulatory scrutiny as of recent.  The Team’s mission will be “to deter, disrupt, investigate, and prosecute criminal misuse of cryptocurrency, as well as to recover the illicit proceeds of those crimes whenever possible.”  Direct from the DOJ’s press release, the NCET will focus on the following areas:
The team will pull resources and expertise from a variety of areas, including the DOJ Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and Computer Crime and Intellectual Property Section (CCIPS), along with other sections and the various U.S. Attorney Offices as needed.  Further, the NCET will be guided by the Department’s Cryptocurrency Guidance and Enforcement Framework that it published last year.  This includes leveraging established partnerships with other regulators, such as the Securities and Exchange Commission and FinCEN. 
In a rush to go to market, many exchanges may have shirked their regulatory requirements, or simply turned a blind eye in their lust for profits.  Without necessary compliance controls centered around anti-money laundering and sanctions compliance, these services and, by extension, these technologies can be used by bad actors to circumvent critical laws and regulations.  Moreover, cryptocurrency, and Bitcoin in particular, rose to prominence off the back of Silk Road – the online marketplace that peddled various illicit goods globally.  Since the prosecution of Silk Road’s founder Ross Ulbricht, those online black markets have since fragmented and have become increasingly difficult to identify and shut down.  More resources and enforcement in that area would be beneficial. 
For the average cryptocurrency enthusiast, this news shouldn’t affect much of what he or she is doing in the space.  While there is still always some level of threat with new and emerging technologies – such as cryptocurrencies – that regulators overreact and approach, I don’t expect the DOJ to do so.  Yield farming, liquidity mining, and NFTs will generally not concern the DOJ here (though that may not be the case for other regulators).  Instead, for example, I expect the DOJ to continue its work in preventing and stopping ransomware, which is ultimately only tangentially related to cryptocurrency. 
I anticipate that the biggest area which may disrupt avid users in the decentralized finance world (“DeFi”) may be tools and protocols dealing with privacy.  As I’ve written in the past, this will still continue to be a key battleground between regulators and the cryptocurrency industry.  While there are variety of positives that come with private transactions, there are unfortunately significant downsides.  The most obvious and glaring – if you’re a bad actor doing bad things with cryptocurrency, you obviously want to stay outside the spotlight of regulators.  Privacy tools – such as mixers and tumblers – help bad actors accomplish that task. 
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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