November 30, 2022

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(Kitco News) – The United States Department of the Treasury is preparing to call for public comments related to digital assets based on a document that is set to be published in the Federal Register on Tuesday. 
The document, entitled “Ensuring Responsible Development of Digital Assets,” requests that the public share their views on “digital-asset-related illicit finance and national security risks as well as the publicly released action plan to mitigate the risks” related to President Joe Biden’s executive order on crypto from March. 
Included in the “request for comment” document are more than 20 questions asking the general public if the Treasury Department has “comprehensively defined the illicit financing risks” involved with crypto. It also lays the groundwork for various government offices to create a “coordinated action plan” to address the possible national security risks posed by digital assets.
“The growing use of digital assets in financial activity heightens risks of crimes such as money laundering, terrorist and proliferation financing, fraud and theft schemes, and corruption,” the notice said. “These illicit activities highlight the need for ongoing scrutiny of the use of digital assets, the extent to which technological innovation may impact such activities, and exploration of opportunities to mitigate these risks through regulation, supervision, public private engagement, oversight, and law enforcement.”
The notice referenced the six “principal policy objectives” laid out in U.S. President Joe Biden’s executive order on crypto, which include consumer protection, financial stability, mitigating illicit finance, promoting U.S. leadership in the global financial system, supporting affordable financial services and boosting responsible development of digital assets.
Some of the specific areas where the Treasury is looking for input include the potential steps it can take to better address ransomware attacks, illicit finance risks of cryptocurrency mixers and DeFi, illicit risks posed by nonfungible tokens, and how the government can better coordinate AML/CFT standards on a global scale. 
The agency is also looking for input on which existing regulatory obligations are “no longer fit for purpose as it relates to digital assets,” and asked for suggestions as to what “alternative obligations should be imposed to effectively address illicit finance risks related to digital assets and vulnerabilities.”

On the topic of central bank digital currencies (CBDCs), the Treasury department wants to know how it can “most effectively support the incorporation of AML/CFT controls into a potential U.S. CBDC design.”
According to Brian Nelson, Under Secretary for Terrorism and Financial Intelligence, “without appropriate controls and enforcement of existing laws, digital assets can pose a significant risk to national security by facilitating illicit finance, such as money laundering, cybercrime and terrorist actions.”
“As we work to implement the Illicit Finance Action Plan, hold bad actors accountable and identify potential gaps in existing enforcement, we look forward to receiving the public’s input on this urgent work,” he said.
The public has until Nov. 3 to submit comments related to the notice. 
 
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