What is the National Cryptocurrency Enforcement Team (NCET)?

Keep up with emerging regulatory change for cryptocurrency with CUBE.

The National Cryptocurrency Enforcement Team is a new task force set up by the US’ Justice Department. It aims to tackle the millions of dollars’ worth of criminal misuse activities in the cryptocurrency industry. By investigating cases of criminal activity, connecting industry leaders and developing new tools for prevention, the NCET aims to eradicate the exploitation of digital assets.

History of cryptocurrency regulation in the United States

When compared with traditional assets like cash, gold and art, cryptocurrency is a whole new ball game. Described as ‘virtual coins’ with values that fluctuate significantly more than real world tender, cryptocurrency first started gaining popularity in 2011. This is the year when Bitcoin broke the $1 mark. 

As such a new idea, it was hard for regulators to immediately react with frameworks and governance. This opened the door for the misuse of cryptocurrency, and in particular, criminals piggybacking the scene to develop some pretty sophisticated new cons.

From hacking into accounts to ‘pump and dump schemes’, phishing scams and fake celebrity endorsements – the list of fraudulent activities around cryptocurrency is only growing. This mirrors the growth in popularity of cryptocurrency in the US. 

General regulation could never really be applied in this space, since the state-of-the-art blockchain technology which powers crypto is so different to traditional finance. Even though panels like the UK’s Prudential Regulation Authority ensure that firms generally have to work to minimize the risk to customers, there is no specific text around cryptocurrency.

The uncertainty around cryptocurrency regulations has led to the call for something more conclusive. Introducing: the US’ national cryptocurrency enforcement team (NCET). 

What does the national cryptocurrency enforcement team do?

First announced in October 2021, the NCET is a group formed by the Department of Justice (DoJ). Their purpose is to react to cases of criminal misuse with regards to cryptocurrency- whether this is inside virtual currency exchanges or other infrastructure providers. 

The NCET has four major purposes: 

1. Identify cases of criminal activity by liaising with private companies
   
   
2. Investigate suspicious activities using the FBI’s virtual asset exploitation unit and criminal division
   
   
3. Support law enforcement and federal prosecutors with advice and training, as well as setting up information sharing channels
   
   
4. Pursue criminals by creating robust compliance programs
    

It’s incredibly important that the NCET forms a good relationship with cryptocurrency exchanges and private companies. In the past, tension has led to a lack of information-sharing in cryptocurrency cases, even when exchanges have fallen victim to ransomware attacks, for example. 

Moreover, we expect to see a focus on innovation. The development of cryptocurrency-specific tools is likely to prove an important measure in preventing and combating criminal activity in the crypto world. 

Who must comply under NCET?

While the NCET is still in its early days, they haven’t carved out too much of a niche for application. Therefore, compliance is expected across the entire industry of cryptocurrency platforms. Digital currency exchanges and trading platforms are subject to the regulations in the same way that individual private investors are. 

There has also been a stark warning about individuals or companies giving advice about investing in cryptocurrency. Since typical financial advisory regulations don’t extend to crypto, the NCET may view this part of the realm under crypto crime. 

As an extension of three already-established organizations (the DoJ’s anti money laundering and asset recovery group, computer crime and intellectual property section, law enforcement offices and attorneys offices), it’s clear that the pooled resources are intended to extend past current reach.

With a huge recent investigation and $300 million fine for Robinhood for non-compliance of cryptocurrency regulations, it’s become far more pressing for companies to ensure that they follow the frameworks. 

If you’re struggling to keep up with the pace of regulatory change for cryptocurrency, we’d love to hear from you.