How will DOJ’s new crypto enforcement team change the game for industry players, good and bad?

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On October 6, the United States Department of Justice, or DOJ, announced the creation of a specialized unit, the National Cryptocurrency Enforcement Team, or NCET, to prosecute criminal abuse of digital assets and infrastructure. cryptocurrencies, as well as finding and recovering ill-gotten cryptocurrency.

This move continues to push US authorities to disrupt corners of the crypto ecosystem that are supposed to facilitate illicit activity, such as ransomware attacks. What does the rise of government crypto application hold for the larger digital asset space?

Pool crypto expertise

The new unit will operate according to the principles laid out almost exactly one year ago in the DOJsCryptocurrency Enforcement Framework. The document, for its part, affirms the department’s broad jurisdiction over criminal activities that affect the financial or data storage infrastructure in the United States.

In addition to investigating its own cases and supporting the efforts of U.S. prosecutors’ offices across the country, the NCET will foster cooperation among all relevant federal, state, and local law enforcement agencies to combat crime. related to cryptocurrencies. The team is also responsible for training and advising law enforcement officers on cryptography issues and developing investigative strategies.

The officers of the new working group will come from both the Money Laundering and Asset Recovery Section and the Computer Crime and Intellectual Property Section of the DOJ, as well as a number of offices. American lawyers.

In a conversation with Cointelegraph, Kevin Feldis, partner at the law firm Perkins Coie, called both MLARS and CCIPS as well-respected components of the Department of Justice, whose members are familiar with cross-border investigation management and coordination. with law enforcement around the world.

New tool for existing policies

NCET should direct its enforcement efforts towards illegal or unregistered money services, ransomware payment infrastructure, and various other markets where digital money encounters criminal activity. None of this is particularly new, and the DOJ is simply putting in place a more streamlined and coordinated mechanism to tackle cybercrime and potentially recover stolen funds.

The announcement also extends a series of developments that exemplify the Biden administration’s commitment to take a high-priority stance on cybercrime, including criminal activity facilitated by cryptography.

Jackson Mueller, director of political and government affairs at digital asset firm Securrency, commented to Cointelegraph:

This announcement should come as no surprise to those of us who follow the Biden administration and its efforts, whether through federal financial regulators, the Treasury Department, the Presidents’ Stable Coin Task Force, among others. , to apply further scrutiny and enforcement action against the broader ecosystem.

Mueller added that the emergence of NCET signals governments’ preference for more enforcement-oriented policies rather than the engagement and cooperation orientation that many industry players would prefer to see.

Michael Bahar, chair of the cybersecurity practice at global law firm Eversheds Sutherland, traces the roots of the NCET initiative to Joe Bidens’ executive order of May 2021, which brought the full reach of authorities and Federal government resources a top priority to protect nations’ computer systems from cyber attacks. Bahar added:

As part of this whole-of-government effort, the United States Department of Justice is using its decades of experience in tracking money and eradicating money laundering, both to catch the perpetrators and to restore the money, as well as to undermine the incentive for criminals to engage in ransomware attacks in the first place.

Ron Bris, government affairs and lobbying attorney at law firm Gunster, said the DOJ is connecting the dots across all of its sections to focus more attention on cryptocurrency-related investigations and prosecutions. Bris added that he would not be surprised to see some states replicate the federal initiative, establishing their own cryptocurrency enforcement teams in the near future.

Wider implications

Certainly, weeding out the bad players in the cryptocurrency industry who give the entire industry a bad name in the eyes of the public (and, quite often, in the eyes of policymakers) is a noble endeavor. Yet there is also a legitimate concern for those crypto players who act in good faith and invest substantial resources in compliance – that is, for the overwhelming majority of industry participants. .

A scenario in which an overly aggressive application could create an additional burden on legitimate players is not hard to imagine.

Kevin Feldis of Perkins Coie believes that DOJs are focused on stepping up criminal investigations and building capacity to recover illicit crypto proceeds will also likely mean closer government scrutiny across the industry. Feldis added:

The legal and regulatory landscape continues to evolve, and investing in compliance and being a good corporate citizen of crypto will likely serve industry players well in the face of this heightened focus of government by the DOJ, SEC, and others.

At the same time, the kind of app expert enough to distinguish criminals without placing an undue burden on the good guys could be a boon to the industry. Bringing together all of the DOJ’s most crypto-savvy people into a well-coordinated force could also lead the NCET to exercise its enforcement authority in a targeted manner.

Gunsters Ron Bris notes that the emergence of a specialist crypto unit within the Department of Justice could be seen as beneficial, all things considered. He commented:

From a broader perspective, if there is a remedy for those whose digital funds are stolen, the levels of trust of consumers and crypto companies will rise.

Indeed, if the NCET lives up to its stated mission rather than casting unnecessarily wide nets, the crypto space will become a safer place for legitimate financial activity.

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