Crypto to pose challenges to law enforcement activities, according to DOJ

The document outlines what cryptocurrencies are and their potential use cases, including sections on both legitimate and illicit uses. The report is split into three sections: an overview of the cryptocurrency space and its current illicit uses; the laws and regulatory agencies that oversee the space; and the current challenges and potential strategies to address them.

The report distinguishes between virtual currencies, which are a ‘digital representation of value’, and cryptocurrencies, which it describes as being in a subset of virtual currencies that are decentralised and based on blockchains.

Crypto has been used to support terrorism, purchase illicit items, conduct blackmail and extortion, cryptojacking and launder funds, and the report warns that cryptocurrencies are more difficult for investigators to learn about than previous tools for executing crimes, citing pump-and-dump schemes as one example.

The third section that outlines challenges, the DOJ noted that some exchanges and entities play ‘jurisdictional arbitrage’, looking for the friendliest jurisdiction in which to operate. This can harm law enforcement agencies’ efforts to ‘investigate, prosecute and prevent criminal activity’ that involves virtual assets, the report claimed.

Agencies with oversight or enforcement power in the crypto space include the Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), the Office of the Comptroller of the Currency (OCC), the SEC, the CFTC and the Internal Revenue Service (IRS). The Financial Action Task Force (FATF), an intergovernmental organisation that provides standards and recommendations for international money laundering rules, also received a mention.