Crypto Exchanges Shall Now Face U.S. DOJ’s Scrutiny – NCET Chief 

• 1 NCET is the cryptocurrency watchdog of DoJ.
• 2 The watchdog will oversee crypto companies regarding AML and illicit activities.

Crypto entities operating in the United States are already facing the scrutiny of the financial watchdog, the Securities and Exchange Commission (SEC). The U.S. DoJ’s cryptocurrency watchdog NCET will now scrutinize the industry against criminal activities and AML.

The U.S. Department of Justice and Crypto Industry

The Department of Justice’s (DoJ) National Cryptocurrency Enforcement Team (NCET) would oversee crypto entities directly or indirectly engaged in criminal activities or money laundering.

NCET director Eun Young Choi, aka U.S. crypto tsar, speaking with the media on May 14, 2023, argued that America is enhancing scrutiny over crypto exchanges operating in the country. They are trying to point out and penalize the illicit activities carried out on the platforms.

She also mentioned that the DoJ would target crypto entities that are either engaged themselves or allow their platform to be used for money laundering. Both are serious offenses.

The anonymity and other features of the crypto industry make cryptocurrencies one of the best tools to launder money. Black money holders and criminals exploit this facility for heinous acts like terror funding, human/drug trafficking, etc. User identities are also stolen to carry out criminal acts of money laundering.

DoJ would probably focus on Decentralized Finance’s vulnerable projects, like chain bridges, because they act as a weak link during interoperability operations. Although these bridges facilitate interoperability, they are prone to attacks, and data suggests that they have been the sweet target spot for hackers worldwide.

The department also claims that many crypto companies exploited the absence of laws by avoiding anti-money laundering laws, risk mitigation, and regulations surrounding KYC. Moreover, the crypto companies failed to comply with the administration. By increasing the scrutiny over them, DoJ is trying to have a “multiplier effect,” which would send a “deterrent message” to the companies.

Choi refrained from taking any names but cleared that the size of the exchange, currency, DeFi platform, or any other factor would not be considered. Justice will be delivered regardless.

Factors That Pushed DoJ to Enter the Crypto Arena

According to the Department of Justice, the use of digital assets to carry out criminal activities increased considerably in the last five years. The probable reason behind this could be the increased public adoption of cryptocurrency. With this scenario, bad actors can quickly transfer assets, and blockchain’s anonymity dramatically helps in illicit activity.

In March 2023, a Vietnamese national, Minh Quoc Nguyen, was charged with identity theft and money laundering. She was also accused of violating the financial regulations of ChipMixer.

In the infamous FTX saga, the founder faces multiple criminal charges, including wire fraud, money laundering, political lobbying, etc. The exchange was allegedly involved in misusing investors’ funds for personal gains. FTX’s collapse was the major incident that emphasized the regulatory requirement in the crypto industry.

Digital assets are slowly becoming the most favorable form of currency to be laundered and used in illicit activities. Hence the requirement for stricter rules punishing such activities is required worldwide.