The US Treasury publishes a long list of crypto risks for consumers and national security.
In response to U.S. President Joe Biden’s Executive Order, “Ensuring Responsible Development of Digital Assets,” the U.S. Treasury Department put out three publications on digital assets on Friday. One of them is all about crypto assets, and the other is shorter and looks at how to deal with risks related to illegal finance.
The report “Crypto-Assets: Implications for Consumers, Investors, and Businesses” talks about crypto assets in a cynical way right from the start. In the first few paragraphs, it says:
“Developers and supporters of blockchain technology have said that it could change the way financial services are provided, but that hasn’t happened yet.”
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About half of the report is a description of crypto assets. After that, the authors talk about the risks they pose to users. It divides risks into three groups. The first is “conduct risks,” which are related to how people act in the ecosystem. The report says that cryptocurrency fraud losses went through the roof in 2021 and are on track to break that record this year. It also points out different problems with transparency.
Operational risks, which include “deficiencies in information systems or internal processes, human errors, governance and management failures, or disruptions from outside events,” are carefully thought through. Crypto-asset intermediation risks are closely related but are talked about separately. These risks are the same ones that investors face in traditional markets, like volatility and custody issues, but they form a “unique landscape” because of how crypto works.
A long section of the report that talks about the opportunities and risks that crypto assets pose for vulnerable groups could be the most useful part of the report. This is especially true because there is a lot of statistical data in the section.
The report suggests three things: careful monitoring with more enforcement, cooperation between agencies and sharing of information, agencies making more rules and guidelines, and more education outreach.
Information and AML/CFT steps are key to fighting digital crime around the world, says a DOJ report.
The “Action Plan to Address the Risks of Illicit Financing of Digital Assets” looks at digital assets from a national security point of view. It suggests seven top actions, most of which have to do with keeping an eye on things and making sure they are done, both at home and abroad.
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It also suggests updating the rules of the Bank Secrecy Act and working more with the private sector through “the publication of official documents, discussions, and Treasury programmes that allow the sharing of information between the public and private sectors.”
