DOJ Crypto Unit Targeting Exchanges: Navigating Regulation and Avoiding Illicit Activities

Twilight-lit courtroom, dramatic chiaroscuro, crypto-exchange platforms on trial, DOJ agents solemnly observing, hint of cyberpunk aesthetic, high-contrast shadows, complex web of digital connections symbolizing regulations, anxious mood, looming DeFi architecture, scattered scam debris.

The Department of Justice’s (DOJ) crypto-focused enforcement unit is ramping up its efforts to clamp down on illegal activities within the digital assets sector. The head of the unit, Eun Young Choi, is determined to take action against illicit behavior and crimes facilitated on digital platforms, with a particular focus on crypto exchanges.

Over the past four years, there has been a significant increase in crypto-related criminal incidents. Choi emphasized the DOJ’s National Crypto Enforcement Team’s (NCET) role in addressing exchanges that engage in illicit behavior or facilitate crimes such as money laundering. Exchanges that fail to follow anti-money laundering or client identification rules will be the focus of the agency’s continuous efforts to maintain law and order in the crypto industry.

Implementation of solid compliance and risk mitigation practices is essential for crypto exchanges to avoid being targeted by the DOJ. For instance, Binance, a prominent crypto exchange, has faced accusations regarding its alleged unlawful operations within the US. Meanwhile, the CEO of Coinbase, Brian Armstrong, has suggested that the company may consider moving its headquarters abroad if the regulatory environment in the US remains unfavorable.

The NCET was established in October 2021 to tackle various crypto-related offenses, including money laundering and cybercrime. Choi asserted that market size would not provide immunity to companies operating in violation of US criminal law, stating that growth could not be used as a shield against accountability.

In addition to exchanges, the DOJ’s crypto unit is preparing to take action against investment scams, with the number of funds lost to such schemes rising dramatically in recent years, from $900 million in 2021 to over $2.5 billion last year. In April alone, the DOJ seized more than $112 million worth of crypto scams known as “pig butchering” schemes.

The agency is also setting its sights on tackling theft and hacks within the decentralized finance (DeFi) ecosystem, with cross-chain bridges emerging as a prime target for malicious attacks. Choi’s remarks signal an increasingly challenging environment for the crypto industry, following a tumultuous year marked by the downfall of several notable crypto players like Terraform Labs, Three Arrows Capital, and FTX.

Source: Blockworks

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