DOJ Announces Report on Law Enforcement in Digital Assets and Launches Nationwide Digital Asset Coordinator Network | Practical Law

DOJ Announces Report on Law Enforcement in Digital Assets and Launches Nationwide Digital Asset Coordinator Network | Practical Law

The US Department of Justice (DOJ) announced the release of a report on law enforcement response to digital asset criminal activity prepared in response to the Biden digital asset executive order. DOJ also announced the establishment of a DOJ nationwide Digital Asset Coordinator (DAC) Network to combat the illicit use of digital assets.

DOJ Announces Report on Law Enforcement in Digital Assets and Launches Nationwide Digital Asset Coordinator Network

by Practical Law Finance
Published on 22 Sep 2022 • USA (National/Federal)
The US Department of Justice (DOJ) announced the release of a report on law enforcement response to digital asset criminal activity prepared in response to the Biden digital asset executive order. DOJ also announced the establishment of a DOJ nationwide Digital Asset Coordinator (DAC) Network to combat the illicit use of digital assets.
On September 16, 2022, the US Department of Justice (DOJ) announced:

DOJ Report on Digital Assets

The DOJ report discusses:
  • The manner in which illicit actors are exploiting digital asset technologies.
  • The challenges that digital assets pose to criminal investigations.
  • The initiatives that the DOJ and law enforcement agencies have established to detect, investigate, prosecute, and otherwise disrupt these crimes including:
    • law enforcement efforts and initiatives within the DOJ enforcement divisions;
    • coordination with federal regulatory agencies such as the Department of Treasury (through FinCEN and OFAC), the SEC, CFTC, banking regulators, and consumer protection agencies; and
    • DOJ private sector partnerships with business and financial services organizations.
  • DOJ-recommended regulatory and legislative actions to further enhance law enforcement’s ability to address digital asset crimes.
The DOJ report details the many ways in which illicit actors have exploited digital assets, including three principal categories of illicit uses:
  • Cryptocurrency as a means of payment for or manner of facilitating criminal activity.
  • Digital assets as a means of concealing illicit financial activity.
  • Crimes involving or undermining the digital asset ecosystem.
The DOJ report describes:
  • How novel technology, particularly in the area of decentralized finance (DeFi), has created new challenges for law enforcement.
  • Examples of successful law enforcement efforts to investigate, prosecute, and otherwise disrupt digital asset crimes in spite of the investigative challenges.
  • Initiatives that the DOJ and other law enforcement agencies have established, including the department’s launch of the DAC Network (see DAC Network), to more effectively:
    • detect, investigate, prosecute, and otherwise disrupt digital assets crimes; and
    • seize and forfeit any assets that constitute ill-gotten gains.
In the DOJ report, Attorney General Merrick Garland notes that DOJ must work in tandem with departments and agencies across the US government to prevent and disrupt the exploitation of these technologies for facilitating crime and undermining US national security. In line with the whole-of-government approach called for in EO 14067, the DOJ notes both reports are the culmination of collaborative efforts between the DOJ, led by its National Cryptocurrency Enforcement Team (NCET), and multiple federal agencies, including the Department of the Treasury, the Department of Homeland Security, and the Department of State.
The DOJ report notes that it complements a June 6, 2022 DOJ report on how to strengthen international law enforcement cooperation for detecting, investigating, and prosecuting criminal activity related to digital assets.
The DOJ report also noted that in further response to EO 14067, the Attorney General has transmitted to the White House Counsel’s Office an assessment from the DOJ of whether legislative changes would be necessary to issue a US central bank digital currency (CBDC), should a CBDC be deemed appropriate and in the national interest.

Digital Asset Coordinator (DAC) Network

The DOJ announced the establishment of the nationwide Digital Asset Coordinator (DAC) Network by the DOJ's criminal division. According to the DOJ, the DAC Network is designed to:
  • Serve as the DOJ's primary forum for prosecutors to obtain and disseminate specialized training, technical expertise, and guidance about the investigation and prosecution of digital asset crimes.
  • Serve as a source of information and discussion regarding new digital asset issues, such as DeFi, smart contracts, and token-based platforms, and their use in criminal activity.
  • Raise awareness of the unique international considerations of the crypto ecosystem, including:
    • the benefits of leveraging foreign relationships; and
    • the challenges of cross-border digital asset investigations.
According to DOJ, the DAC Network membership is composed of over 150 designated federal prosecutors across the litigating components within DOJ (including criminal and national security divisions, FBI, DEA, and US Marshals Service) to investigate and prosecute digital asset crimes. As members of the DAC Network, DAC prosecutors:
  • Learn about the application of existing authorities and laws to digital assets to, as well as best practices for:
    • investigating digital assets-related crimes; and
    • drafting search and seizure warrants, restraining orders, criminal and civil forfeiture actions, indictments, and other applicable pleadings.
  • Are expected to act as their office’s subject-matter expert on digital assets, serving as a first-line source of information and guidance on legal and technical matters related to these technologies.
  • The DAC is led by the DOJ’s NCET, which, under DAC, will work in close coordination with the DOJ criminal division’s computer crime and intellectual property section and the money laundering and asset recovery section’s digital currency initiative.