Crypto Industry Insiders Respond to Possible DOJ Criminal Crackdown

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By Anushree Dave

The crypto industry is weighing what to do with a potential US Justice Department crackdown on crime on digital platforms.

Eun Young Choi, director of the department’s National Cryptocurrency Enforcement Team, told the Financial Times in an interview published on Monday that the Justice Department is focusing on companies that enable crimes to happen or commit them themselves, such as money laundering, she said in the interview.

“Ms. Choi’s comments reflect a culmination of events over the past few years. The US government has long understood that crypto is not only borderless but also virtual, making regulatory or criminal enforcement much more difficult for a myriad of jurisdictional reasons,” said Miles Fuller, head of government solutions at TaxBit, a crypto tax tracking and reporting company.

US authorities have already gone to great lengths to crack down on crypto crime. The Department of Justice, for example, arrested the founder of digital exchange Bitzlato in January after allegedly passing around $700 million in illicit crypto funds. In February, a man was accused of defrauding Mango Markets, a decentralized financial platform, of crypto worth $110 million.

While crypto industry insiders welcome the crackdown on crime, some question the potential impact on crypto innovation.

“I hope the recent DOJ statements do not contribute to increased market uncertainty resulting from regulators’ continued enforcement-based approach,” said Rahson Boykin, general counsel at Hashflow, an exchange. decentralized. “It would benefit all parties involved if Congress could enact clear and comprehensive crypto regulations, providing the industry with guidance on the compliance rules necessary to foster overall growth.”

Boykin says lawmakers need to recognize that if they continue down this path, crypto could be forced out of the US market.

These are similar sentiments to those shared by Coinbase CEO Brian Armstrong, who encouraged the United States Securities and Exchange Commission to adopt strict rules that govern and regulate assets that are traded digitally, including potential rules to identify which digital assets are securities. At the same time, Armstrong expressed concern that regulating certain aspects of the crypto industry, such as staking, would be a terrible path for retail traders, and that the United States should ensure that new technologies are encouraged to develop and are not stifled by the absence of clear rules.

The Securities and Exchange Commission also cracked down on crypto this year. In January, it hit Genesis Trading and Gemini, two popular crypto exchanges, with fees related to unregistered securities. In February, the SEC accused Do Kwon of Terraform Labs of allegedly defrauding crypto investors. In March, the SEC also slammed stars like Lindsay Lohan and Jake Paul for allegedly illegally touting crypto stocks.

The biggest crackdown on crypto crimes in the US came after the collapse of FTX in November. FTX was once one of the most popular crypto exchanges in the world, led by former founder and CEO Sam Bankman-Fried, who was arrested in the Bahamas in December. In 2022, crypto hacks and scandals cost victims over $3 billion.

“After the FTX bankruptcy, the United States may be learning that many more American individuals than they thought were using the offshore version of FTX,” TaxBit’s Fuller said. “That also appears to be what the US government thinks is happening with Binance as well.”

Fuller says that in the short term this could harm the industry as it highlights the illicit side of how crypto can be used. “But in the longer term, it will push the industry towards a more holistic solution to dealing with bad actors on these platforms and how these platforms will need to evolve if crypto adoption is to be expected. by the general public.”

Overall, industry insiders want crackdowns on crime and clearer rules about what’s allowed so everyone can play fairly.

-Anushree Dave

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(END) Dow Jones Newswire

05-16-23 1719ET

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