US Treasury Wants Public to Comment on Crypto’s Role in Illicit Finance

The Treasury Department listed a number of questions, asking the general public to weigh in on how it’s approaching cryptocurrencies and their possible role in illegal activities.

AccessTimeIconSep 19, 2022 at 3:37 p.m. UTC
Updated May 11, 2023 at 6:13 p.m. UTC

The U.S. Treasury Department wants the public, including the crypto community, to weigh in on how digital assets might be used in illegal activities, and how the department should respond to this issue.

The Treasury Department published a “request for comment” Monday listing over 20 questions and asking the general public to explain whether it has “comprehensively defined the illicit financing risks” tied to crypto, and noting that various federal officials – including the Treasury Secretary, Attorney General, Homeland Security Secretary, Director of National Intelligence and Secretary of State – would create a “coordinated action plan” to address the possible national security risks posed by digital assets.

“The growing use of digital assets in financial activity heightens risks of crimes such as money laundering, terrorist and proliferation financing, fraud and theft schemes, and corruption,” the notice said. “These illicit activities highlight the need for ongoing scrutiny of the use of digital assets, the extent to which technological innovation may impact such activities, and exploration of opportunities to mitigate these risks through regulation, supervision, public private engagement, oversight, and law enforcement.”

The notice is tied to U.S. President Joe Biden’s executive order on crypto, it said, and references six “principal policy objectives,” which include consumer protection, financial stability, mitigating illicit finance, promoting U.S. leadership in the global financial system, supporting affordable financial services and boosting responsible development of digital assets.

The questions range from asking about how crypto might be used in illicit finance and what risks they pose, to the role of anti-money laundering and countering the financing of terrorism rules. Other questions ask if there are any existing “regulatory obligations … [that] are not or no longer fit for purpose as it relates to digital assets.”

Yet another question, in a section on private sector engagement, asks, “How can the U.S. Department of the Treasury, in concert with other government agencies, improve guidance and public-private communication on [Anti-Money Laundering/Combating the Financing of Terrorism] and sanctions obligations with regard to digital assets?”

In a statement, Under Secretary for Terrorism and Financial Intelligence Brian Nelson said that “without appropriate controls and enforcement of existing laws, digital assets can pose a significant risk to national security by facilitating illicit finance, such as money laundering, cybercrime and terrorist actions.”

“As we work to implement the Illicit Finance Action Plan, hold bad actors accountable and identify potential gaps in existing enforcement, we look forward to receiving the public’s input on this urgent work,” he said.

Ongoing work

The federal government has produced a number of reports already tied to the executive order, which was signed by Biden in March 2022. On Friday, the Treasury Department, Justice Department, White House Office of Science and Technology Policy and Commerce Departments all published a number of reports addressing various aspects of the cryptocurrency ecosystem in the U.S.

The White House science office and Treasury Departments both looked at the question of central bank digital currencies and the factors the U.S. should consider if it chooses to issue one.

It’s unclear whether the U.S. will actually issue a digital dollar, or what it may take to produce one. The Department of Justice is looking at the question of what legal authorities the Federal Reserve might need to issue a central bank digital currency, though it has not submitted this analysis to the president yet.

A senior administration official, speaking at a press call ahead of last week’s publications, told reporters that “we’re not going to get ahead of ourselves now while the Fed studies the issue.”

“We believe it’s important to work with Congress on this like we have been,” the official said.

Other reports looked at broader questions of consumer protections and the role of crypto at large.

The Justice Department, however, announced it would launch a new network of prosecutors who would specialize in addressing crypto-related crimes.


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Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

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