Friday, July 1

How will DOJ’s new encryption enforcement team change the game for industry players, for better and for worse?



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, charged with prosecuting the misuse of digital assets and infrastructure. of cryptocurrencies, as well as tracking and recovering ill-gotten cryptocurrency.

The move continues the push by US authorities to disrupt corners of the crypto ecosystem believed to facilitate illicit activity, such as ransomware attacks. What does the government’s increased application of cryptocurrencies hold for the largest digital asset space?

Pool crypto expertise

The new unit will operate in accordance with principles articulated almost exactly one year ago in the DOJ’s Cryptocurrency Enforcement Framework. The document, for example, affirms the Department’s broad jurisdiction over criminal activity affecting the financial or data storage infrastructure within the United States.

In addition to investigating its own cases and supporting the efforts of U.S. Attorneys’ Offices across the country, NCET will promote cooperation among all relevant federal, state, and local law enforcement agencies to address crime related to crimes. cryptocurrencies. The team is also tasked with training and advising law enforcement officers on crypto matters and developing investigative strategies.

The agents of the new task force will come from both the Money Laundering and Asset Recovery Section and the Computer Crimes and Intellectual Property Section of the Department of Justice, as well as various United States Law Offices.

In a conversation with Cointelegraph, Kevin Feldis, a partner at the Perkins Coie law firm, called both MLARS and CCIPS “highly respected components of the Department of Justice,” whose members are “well versed in handling cross-border investigations and coordination with the forces of order in a balloon. “

New tool for existing policies

The NCET is expected to direct its enforcement efforts toward illegal or unregistered money services, ransomware payments infrastructure, and various other markets where digital money meets criminal activity. None of this is particularly new, and the Justice Department is simply putting together a more streamlined coordinated mechanism to tackle cybercrime and potentially recover stolen funds.

The announcement also expands on the series of developments that illustrate the Biden administration’s commitment to the first cybercrime enforcement stance, including criminal activity facilitated by encryption.

Jackson Mueller, director of policy and government affairs at digital asset firm Securrency, told 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 president’s working group on stablecoins, and others, to apply greater scrutiny and enforcement actions against society in general. ecosystem.

Mueller added that the emergence of the NCET indicates the government’s preference for policies more focused on law enforcement rather than the orientation toward compromise and cooperation that many in the industry would prefer to see.

Michael Bahar, president of the cybersecurity practice at global law firm Eversheds Sutherland, traces the roots of the NCET initiative to Joe Biden’s May 2021 executive order, which made full scope pursuit a top priority. from federal government authorities and resources to protect the nation’s computer systems from cyber attacks. Bahar further commented:

As part of that government-wide effort, the U.S. Department of Justice is leveraging its decades of experience in tracking money and eradicating money laundering, both to catch the perpetrators and return the money. , as if to undermine finances. incentive for criminals to engage in ransomware attacks in the first place.

Ron Brisé, a government affairs and lobbying attorney for the Gunster law firm, said the Justice Department is “connecting the dots across its sections to provide a more centralized approach to cryptocurrency-related investigations and prosecutions.” Brisé added that he would not be surprised to see certain individual states replicate the federal initiative, instituting their own cryptocurrency enforcement teams in the near future.

Broader implications

Of course, rooting out bad actors from the cryptocurrency sector that give the entire industry a bad name in the public eye (and, quite often, in the eyes of lawmakers) is a noble endeavor. However, there is also room for legitimate concern for those crypto players who act in good faith and invest substantial resources in compliance – that is, for the vast majority of industry participants.

It is not difficult to imagine a scenario where an overly aggressive application could create an additional burden for legitimate actors.

Perkins Coie’s Kevin Feldis believes that the Justice Department’s focus on increasing criminal investigations and developing the ability to recover illicit proceeds from cryptocurrencies will also mean increased government scrutiny across the industry. Feldis added:

The legal and regulatory landscape is still evolving, and investing in compliance and being a good crypto corporate citizen is likely to serve industry players well in the face of this increased focus on government enforcement by the DOJ, SEC, and others.

At the same time, the kind of expert app that’s competent enough to target criminals without imposing an undue burden on the good guys could be a boon for the industry. Having all of the DOJ’s most crypto-savvy folks within a well-coordinated force could also lead the NCET to give up its enforcement authority in specific ways.

Gunster’s Ron Brisé notes that the emergence of a specialized crypto unit within the Justice Department could be seen as beneficial, all things considered. He commented:

From a broader perspective, if there is a recourse for those whose digital funds are stolen, trust levels for both consumers and crypto companies will increase.

In fact, if the NCET fulfills its stated mission rather than launching networks that are unnecessarily broad, the crypto space will become a safer place for legitimate financial activity.