Cryptocurrency and Money Laundering
New cryptocurrencies pop up seemingly every day. As the acceptance of an entirely digital form of money grows worldwide, the popularity of cryptocurrency grows with it. Opponents of cryptocurrency point towards its ability to facilitate and hide criminal transactions and other money laundering activities. Proponents of cryptocurrency argue that its privacy structure allows people to use their money without needless governmental oversight. As both sides try to find a middle ground, cryptocurrency and money laundering continue to be connected while the federal government tries to investigate, uncover, and prosecute those using cryptocurrency for illicit purposes. If you are facing money laundering charges, then it is important to speak to an experienced federal money laundering attorney.
CURRENT LEGAL STATUS OF CRYPTOCURRENCY
The legal status of cryptocurrency across the globe varies as you go from country to country. Some countries, like El Salvador, have gone as far as making Bitcoin a national legal tender. Most other countries have not gone this far, and many don’t even recognize cryptocurrency as currency at all. In the United States, it depends on which federal government agency you are dealing with as to how cryptocurrency is viewed. The Securities and Exchange Commission (SEC) treats cryptocurrency as a security. The internal Revenue Service (IRS) treats cryptocurrency as digital property while the United States Treasury considers cryptocurrency as currency. What is consistent is that all cryptocurrency exchanges are regulated by the Bank Secrecy Act which requires registration with the Financial Crimes Enforcement Network (FinCEN) along with other reporting requirements. This inconsistency has led to louder calls for consistent regulation by the federal government, an avenue that is being discussed.
HOW THE FEDERAL GOVERNMENT PLANS TO REGULATE CRYPTOCURRENCY
Federal bank regulators released a joint statement recently, outlining their objectives related to cryptocurrency regulation in 2022. The following topics will be investigated to determine the legality, framework, and consumer protection, they include:
- Crypto-asset safekeeping
- Ancillary crypto custody services
- Customer use of cryptocurrency
- Cryptocurrency collateralized loans
- Holding crypto assets on a balance sheet
As the crypto market continues to evolve, these main topics will help determine federal cryptocurrency law and policy going forward. The United States government is keenly aware of the potential for cryptocurrency to disrupt the value and power of the United States dollar and will do whatever is necessary to protect its value. This sets the stage for new regulation in the not-too-distant future.
HOW CRYPTOCURRENCY REGULATIONS CHANGES CAN ELICIT MONEY LAUNDERING
One of the most attractive reasons for people to hold cryptocurrency is its ability to be “off the grid.” While this may sound great, it is important to understand what you can and can’t do regarding taxation. Up until now, cryptocurrencies have been viewed as an asset where you will realize a gain or loss after the sale of that asset. This allowed many people to leave off their cryptocurrency “earnings” as long as they did not sell cryptocurrency. Due to the Infrastructure Investment and Jobs Act of 2021 (IIJA), all cryptocurrency transactions must be reported on a Form 1099 starting in 2023. All crypto exchanges will be required to report all digital transactions to users and the IRS yearly going forward. A failure to follow the correct cryptocurrency reporting requirements can lead to accusations of money laundering and other crimes. Ignorance of the law is not a defense, make sure that you understand how this can affect you.
HOW DOES THIS AFFECT ME?
Hopefully, none of this affects you. But if you are currently being investigated for alleged illicit transactions or money laundering using cryptocurrency, or have already been charged, then this can affect you directly. Investigation and enforcement related to cryptocurrency are on the rise while cryptocurrency laws continue to evolve. If you need legal help, then be sure to speak to an experienced attorney right away.
