FinCEN to Treat Digital Asset Regulation as a 'Key Priority,' Director Says
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As digital currencies and assets continue to go unregulated, federal law enforcement is actively engaged in developing guidance to prevent financial crime.
The Financial Crimes Enforcement Network is treating digital asset law enforcement as a “key priority area” as federal agencies work to research and develop regulations to safeguard the cryptocurrency industry for consumers.
Speaking during the ABA/ABA Financial Crimes Enforcement Conference on Tuesday, Acting FinCEN Director Himamauli Das briefly touched on the agency’s current actions to provide a framework for virtual currencies.
The agency is working to build upon previous guidance issued in both 2013 and 2019. Das confirmed that FinCEN anticipates decentralized financial tools to continue to have an impact on the general financial services industry.
“We need to mitigate the illicit finance and national security risks posed by the misuse of digital assets,” he said.
FinCEN, in addition to the Treasury Department, is planning on continuing to monitor and evaluate the impact of digital asset trading activities, and where the agency’s current Anti-Money Laundering framework can help prevent crime within the digital asset marketplace. Authorities are also considering adding new regulations that specifically target digital currencies.
Das noted that this will include examining the potential to reduce intermediaries in decentralized finance transactions. Officials are looking to further get input from industry players, specifically within the banking industry, to assess and develop regulatory guidance.
The increasing growth of the payments industry and companies that engage in traditional depository lending practices, specifically FinTech and RegTech companies, has led regulators to broadly classify them as Money Services Businesses that are regulated within the Bank Secrecy Act. Given the rapid growth in the FinTech sector, Das said that his agency is also considering expanding or augmenting the MSB framework to further prevent illicit financial risks associated with using these financial platforms.
“As with our work on digital assets, we welcome your engagement to better understand the vulnerabilities and risks that your institutions are facing,” he said.
Das’s remarks come as government regulatory agencies are continuing exploring guidance options following the high profile bankruptcy of prominent cryptocurrency exchange FTX. Earlier in the fall, FinCEN fined fellow digital asset service company Bittrex $29 million for failing to properly implement transaction safeguards that prevent crime within its decentralized financial trades.