Key Takeaways
- In response to President Biden’s March 9, 2022 Executive Order on digital assets, the DOJ announced the formation of a new network of prosecutors tasked with becoming specialists in investigating and prosecuting alleged digital asset and cryptocurrency criminal activity.
- DOJ simultaneously released a report with priority legislative and regulatory goals for digital asset crime, including strengthening penalties, increasing statute-of-limitations periods, and expanding the anti-tip-off provision, which make it a crime for officers or agents of financial institutions to notify customers when their records are subpoenaed.
- These latest developments further reinforce the Biden Administration’s continued commitment to increasing regulatory and enforcement oversight of the digital asset industry.
- Digital asset market participants should continue to monitor announcements made by U.S. regulators and law enforcement, and be proactive in preparing for increased government scrutiny.
The United States Department of Justice (the “DOJ”) announced the establishment of the nationwide Digital Asset Coordinator (the “DAC”) Network of federal prosecutors on September 16, 2022.1 As we have discussed in several recent OnPoints2, this is the latest in a series of actions by United States law enforcement to ramp up capacity for prosecuting alleged criminal activity in the digital asset and cryptocurrency space. Members of the DAC are intended to act as their Office’s subject-matter expert on digital assets and develop best practices for investigating suspected digital assets-related crimes. The DAC will comprise of more than 150 federal prosecutors in U.S. Attorney Offices and other special litigation divisions nationwide.3
President Biden’s March 2022 Executive Order on Digital Assets
The formation of the DAC is part of the DOJ’s response to President Biden’s March 9, 2022 Executive Order on Ensuring Responsible Development of Digital Assets,4 which we wrote about at the time.5 The Executive Order noted the astronomical growth in the digital asset market, from a market capitalization of US $14 billion in November 2016 to a market capitalization of US $3 trillion in November 2021, and recognized the need for coordination in enforcement action and regulation of the market to protect consumers and combat illicit finance.6 It gave the Attorney General 180 days to submit a report to the President on the role of law enforcement agencies in prosecuting criminal activity related to digital assets, including cryptocurrencies, stablecoins, and other digital currencies.
In a Report released alongside the announcement of the DAC, the DOJ stated that the network “will be a crucial part of the Department’s efforts to continue to address the ever-evolving challenges posed by the illicit use of digital assets[.]”7 The DAC is modeled on other coordinator programs established by the DOJ: the Computer Hacking and Intellectual Property Network and the National Security Cyber Specialist Network. It will work alongside and support the efforts of the National Cryptocurrency Enforcement Team (the “NCET”), an initiative established by the DOJ in February 2022 focused on virtual currency exchanges and related entities.8 The NCET is currently involved in investigations and prosecutions of Hydra, Bitfinex, Helix, and BitMex.9
DOJ Report and Priority Regulatory and Legislative Proposals
The Report also chronicled the categories of illicit uses of digital assets, case studies of successful law enforcement efforts to curtail digital asset crime, initiatives that the DOJ and other agencies have established to disrupt digital asset crime, and recommendations on appropriate regulatory and legislative actions. The DOJ targeted three priority regulatory and legislative proposals for combating alleged cryptocurrency crime: (1) including digital asset crime in …….
Source: https://www.jdsupra.com/legalnews/doj-expands-cryptocurrency-enforcement-4429739/