- The United States Treasury Department has released its National Risk Assessment for the Year.
- The Department has once again raised concerns over the use of crypto assets in illegal financial activities.
- U.S. Treasury Secretary Janet Yellen has recently called for regulations targeting the increasing risks associated with the industry.
The United States Treasury Department has often raised the alarm on the rising popularity of virtual assets among malicious actors who employ advanced technology to facilitate their illegal activities. The department recently conducted its yearly National Risk Assessment, identifying the asset class as a popular choice in money laundering and terrorism.
The department has now called for enhanced regulations to address and potentially curb the growing influence.
US Treasury: Crypto, “A Growing Concern”
On Wednesday, February 7, the U.S. Treasury Department highlighted the prevalence of virtual assets in money laundering, terrorist financing, and proliferation financing.
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The report emphasized that while cash, commonly the U.S. dollar, remains the primary method for unlawful activities, the increasing adoption of the asset class is a growing concern and necessitates immediate enforcement actions.
Decentralized Finance (DeFi) was not left out of the scene, described as a predominant enabler of illicit activities, primarily due to its anonymity and rapid growth.
“Illicit actors, including ransomware cybercriminals, thieves, scammers, and the Democratic People’s Republic of Korea (DPRK) cyber actors, are now using DeFi services to transfer and launder their illicit proceeds,” the report stated.
Citing the November DoJ-Binance crackdown, the report added that violations of Anti-Money Laundering (AML) and sanctions laws on the part of virtual asset service providers also contribute to enabling illegal activities.
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The U.S. Treasury Department, however, acknowledged the benefits of blockchain in terms of transparency, emphasizing that certain elements of the industry aid in tracing funds associated with terrorist financing. Despite this, it maintains that limitations associated with the pseudonymous nature of the data overshadow these benefits, allowing malicious actors to facilitate activities off-chain.
Calls for enhanced regulations have now been raised, aligning with Secretary Janet Yellen’s call to Congress to enact legislation addressing the risks associated with the growing use of cryptocurrencies.
U.S Treasury Secretary Calls for Clearer Crypto Regulations
During a hearing on February 7, Secretary Janet Yellen asserted the need to address the potential vulnerabilities associated with crypto assets.
Yellen underscored that while certain regulations have been implemented for digital assets, identifiable gaps highlight the inconsistency in the commission’s approaches.
“There are many areas with respect to digital assets where we do have clear regulatory authority, but we’ve identified some gaps,” she stated.
Secretary Yellen has now called for applicable rules to be enforced “to provide for the regulation of stablecoins and of the spot market for crypto-assets that are not securities.”
On the Flipside
- In November, the Deputy Secretary of the Treasury, Wally Adeyemo, proposed stricter regulations for dollar-backed stablecoins based outside the U.S.
- The financial watchdog of the United States, the SEC, has recently voted to favor a ‘dealer” rule that grants extended authority over crypto and DeFi.
- The SEC has often come under scrutiny for seemingly neglecting crucial aspects of the industry that require regulations, instead focusing on imposing sanctions on exchanges.
Why This Matters
The U.S. Treasury Department’s reports underscore the urgency for tailored regulations that tackle the asset class’s misuse to prevent further industry exploitation by malicious actors.
Read more about the Treasury Department’s efforts to curb illicit financial activities:
U.S. Treasury to Impose Authority on Crypto-Funded Terrorism
Is crypto exchange OKX caught in regulatory crosshairs in South Korea? Find out here:
OKX Caught in South Korean Crypto Crackdown: Probe Underway?
