In a new Report, the U.S. Attorney General described how law enforcement agencies police digital asset markets and recommended policies to mitigate risks in the digital asset space. The Report is a collaboration between the DOJ, Treasury and the Department of Homeland Security.

The Report, titled The Role of Law Enforcement In Detecting, Investigating And Prosecuting Criminal Activity Related To Digital Assets, describes the "substantial steps already taken by departments and agencies to combat the illicit use of digital assets," but cautions that "success. . . will ultimately depend on the applicable legal and regulatory frameworks keeping pace with rapidly changing technology."

The Report, issued pursuant to President Biden's EO 14067 ("Ensuring Responsible Development of Digital Assets"), categorized digital asset crimes into three principal categories: (i) the use of cryptocurrencies to pay for or facilitate criminal activities; (ii) the use of cryptocurrencies to money launder or evade taxes or sanctions; and (iii) fraud in the sale of digital assets or against legitimate participants in the digital asset marketplace.

The Report included policy recommendations to mitigate risks and improve safety in the digital asset market. These include policies that would:

  • expand the scope of existing anti-tip-off provisions to apply to virtual asset service providers;

  • increase prohibitions against unregistered operation of money transmitting businesses;

  • extend the statute of limitations for prosecuting crimes involving digital assets from five years to 10 years;

  • support initiatives to help law enforcement agencies gather evidence and ensure proper forums for prosecution;

  • implement mandatory cryptocurrency forfeiture in appropriate cases and improve the sentencing guidelines applicable to certain BSA violations;

  • advance FinCEN's proposal to require covered financial institutions to retain records about certain fund transfers or transmittals;

  • ensure compliance with core AML/CFT requirements for new technologies as they emerge; and

  • increased funding to allow the DOJ and law enforcement agencies to conduct data-driven digital asset-related investigations.

The Report cited multiple publications profiling the roles and responsibilities of key regulators in the digital asset enforcement space. The Report also described the recently launched nationwide Digital Asset Coordinators Network, which will act as a "subject matter expert on digital assets, serving as a first-line source of information and guidance about legal and technical matters related to these technologies."