US DoJ cracking down on crime in crypto

The US Department of Justice has appointed the first Director of its National Cryptocurrency Enforcement Team (NCET).

Eun Young Choi joins the team as Director, effective as of 17 February 2022. The appointment points at the probable ramping up of activity for the NCET, as reports of criminal action and market abuse around cryptocurrencies soar.

The NCET was established in October 2021, with a view to managing the increasing challenges posed by cryptocurrencies and digital assets – focussing in particular on the criminal misuse of such currencies. Talking about the formation of the group at the time, which is comprised of crypto experts including attorneys, Deputy Attorney General Lisa Monaca had said that the team will focus on “combating misuse of cryptocurrency to launder or hide criminal proceeds”.

While the group has been in operation since October, the appointment of Eun Young Choi suggests that the group will be looking to increase activities under her lead. Commenting on her appointment, Assistant Attorney General, Kenneth Polite Jr. noted that:

“With the rapid innovation of digital assets and distributed ledger technologies, we have seen a rise in their illicit use by criminals who exploit them to fuel cyberattacks and ransomware and extortion schemes…the NCET will serve as the focal point for the department’s efforts to tackle the growth of crime involving these technologies”.

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The DoJ’s appointment follows hot on the heels of a similar move by the UK parliament and House of Lords, who recently formed the Crypto and Digital Assets Group – the first body of its kind to focus efforts on the emergent UK crypto industry and the associated risks.

The UK’s CDAG group’s priorities are rooted in the understanding of crypto and the technology that surrounds it. It looks to foster innovation and create a regulatory framework that encourages creativity, while preventing criminal action and misuse. The US’s NCET, on the other hand, has a keen focus on the criminality surrounding crypto, serving to bolster the Department of Justice’s existing work in identifying, investigating, and pursuing cases concerning the misuse of crypto and associated technologies.

Differences aside, both of these developments point to affirmative action from influential industry bodies in their efforts to understand crypto and protect consumers from any potential risks.

What is most interesting is the speed at which governments and industry bodies are acting. The creation of industry bodies is often slow and cumbersome, with years of consultation and exploration. Emerging crypto groups, on the other hand, appear to almost be coming out of thin air. Looking at the motivation behind the pace of change, it’s not hard to see cause and effect.

As we noted in a recent blog, a report by Chainanalysis recently found that criminal transactions relating to crypto reached $14 billion in 2021. We frequently hear horror stories of crypto-gone-wrong or individuals losing hundreds, if not thousands, in savings. Crypto protection is currently thin on the ground – and the framework for active prevention of misuse is even harder to come by.

Judging by the pace of governmental and industry change towards crypto, it is not inconceivable to suggest that regulatory change will be next, as pointed to by Gary Gensler and multiple other regulatory leaders in the past few months. For those that have buried their heads in the sand for crypto…now might be the time to come up for air.