US Treasury seeks comment on Crypto’s illicit financial risks

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, theft 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 help the agency put controls in place to hold bad actors accountable and 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, principal of financial technology and risk advisory firm Capitol Peak Strategies LLC.

“This [commentary process] shows that the Treasury Department is taking public engagement very seriously … from the lens of risk, as opposed to risk and opportunity, said Zerden, a former Treasury secretary in the Obama and Trump administrations. He added that it would ultimately be up to the Treasury to decide how to incorporate the comments they receive into their 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 may pose to consumers and to the financial system in a series of reports set to become public this month, The Wall Street Journal previously reported.

The reports, which the Treasury Department is completing and sending to the White House, will contain Treasury’s analysis of crypto markets, and will each focus on one of four topics — the payments system, consumer protection, illicit finance and financial stability — but are unlikely to offer much specific guidance .

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

Last Friday, the Biden administration released a broader set of frameworks from various agencies regarding 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 efforts to combat the rise in crime related to the use of cryptocurrencies such as bitcoin.

Write to Mengqi Sun at [email protected]