U.S. Treasury Seeks Comment on Crypto’s Illicit Finance Risks

The U.S. Treasury Department is seeking public comment on the possible illicit finance and national security risks posed by the use of digital assets, as part of the agency’s mandate under President Biden’s March executive order to study the development of cryptocurrency.

The request for comment, issued Monday, also asks the public for suggestions to mitigate these risks by the deadline of Nov. 3.

The Treasury, in a version of the request-for-comment document on the Federal Register website, said crypto has been used in sophisticated cybercrime-related financial networks and activity, including through ransomware. The growing use of digital assets has increased the risk of crimes such as money laundering, terrorist financing, fraud, thefts and corruption, according to the document.

Brian Nelson,

the Treasury under secretary for terrorism and financial intelligence, said in a statement Monday that public input will aid the agency in setting controls to hold bad actors accountable and to identify potential gaps in existing enforcement.

Various stakeholders, including crypto industry advocates, members of civil society, traditional financial institutions and crypto firms, are expected to provide comments, according to Alex Zerden, the principal of financial technology and risk advisory firm Capitol Peak Strategies LLC.

“This [commentary process] shows the Treasury is taking public engagement very seriously…from the lens of risk, as opposed to the one of risk and opportunity,” Mr. Zerden, a former Treasury official in the Obama and Trump administrations, said. He added that it would eventually be up to the Treasury in determining how to incorporate the comments it receives into its policy-making process.

The request for comment comes as the crypto market sees another wave of volatility, adding to calls for greater regulatory oversight. Bitcoin, the world’s largest cryptocurrency by market capitalization, traded at $18,776 earlier Monday, down 4.8% from its late Sunday levels, before recently moving back above $19,000.

The Treasury Department is expected to lay out the risks it perceives cryptocurrencies could pose to consumers and to the financial system in a series of reports that are set to become public this month, The Wall Street Journal previously reported.

The reports, which the Treasury is completing and sending to the White House, will feature Treasury’s analysis of crypto markets, and will each focus on one of four topics—the payment system, consumer protections, illicit finance and financial stability—but is unlikely to offer many specific policy prescriptions.

President Biden’s March executive order on digital assets commissioned the reports, asking other agencies to also produce analysis.

The Biden administration last Friday released a broader set of frameworks from various agencies concerning regulatory approaches to developing the digital currency ecosystem. The Justice Department also said it has tapped more than 150 federal prosecutors across the country to bolster law enforcement’s efforts to combat the rise in crime linked to the use of cryptocurrencies such as bitcoin.

More From Risk & Compliance Journal

Write to Mengqi Sun at mengqi.sun@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Share this post

Leave a Reply

Your email address will not be published.