DOJ’s new guidance has crypto community up in arms
The DOJ recently published its Cryptocurrency Enforcement Framework, but many in the crypto sphere think it still lacks clarity
Yesterday was a busy news day for cryptocurrency crime – ZDNet released the results of their investigation detailing how criminal gangs had stolen more than $22 million in crypto funds. The criminals targeted users of the Electrum wallet app by abusing Electrum’s open ecosystem to send users fake update requests that actually installed malware.
Meanwhile, in the UK, the infamous Tesco blackmailer, Nigel Wright, was sentenced yesterday to 14 years in jail. After placing contaminated jars of baby food on the supermarket shelves, he wrote to Tesco demanding they pay him a £1.4 million ($1.8 million) ransom in Bitcoin.
However, many crypto projects and exchanges have also felt the long arm of the law in recent months, not because they were purposely breaking the rules, but because they didn’t know what the rules were.
This has often been down to the old question of whether a token sold in an Initial Coin Offering (ICO) is a security, and therefore falls under the jurisdiction of the Securities and Exchange Commission (SEC). The SEC has used the Howey Test to determine that it is a security, to the cost of Kik and Telegram, which were both sued by the SEC for their ICOs.
So, some regulatory clarity was certainly needed and the US Department of Justice (DOJ) tried to provide just that with their recently published 83 page Cryptocurrency Enforcement Framework.
The report starts out on a positive note, stating: “At the outset, it bears emphasizing that distributed ledger technology, upon which all cryptocurrencies build, raises breathtaking possibilities for human flourishing.” However, the rest of the document suggests that the DOJ sees cryptocurrencies as more of a threat than an opportunity.
The report details many case studies of crimes that have been or could be committed with cryptocurrencies, including illicit purchases, extortion and supporting terrorism. In future, any cryptocurrency or protocol that could be used to launder funds anonymously will be a potential target for legal action.
The release of the report hasn’t been welcomed by many in the crypto community, with one Twitter user saying it “… sounds straight out of 1984 or Brave New World. The Feds want to “protect” us. But let’s face it: it actually means they want to control bitcoin.”