The U.S DOJ Seeks To Regulate Bitcoin
The end of decentralized digital currencies
Today, October 8th, 2020, the United States Department of Justice (DOJ), Attorney General’s Cyber Digital Task Force announced a new report called the Cryptocurrency: An Enforcement Framework, where the Cyber Digital Task Force discussed concerns and resolutions for popular Cryptocurrencies like Bitcoin and Lite Coin. Here’s what you need to know:
1 The Threats: There are (3) major threats the DOJ was concerned about. (1) The increase of the act of using cryptocurrency directly to commit crimes or support terrorism organizations. (2) The act of using cryptocurrency to hide financial activity through anonymity cryptocurrency platform trading. (3) The act of committing crimes within the cryptocurrency marketplace itself.
2 DOJ Perspective: The DOJ sees cryptocurrency as a financial institution providing a security. Cryptocurrencies are taxed as long term capital gains/property taxes that receive a 0–20% tax bracket. When users decide to purchase or sell cryptocurrencies, they are taxed as an asset, when provided as a gift, its looked at as a gift tax credit benefit, and when paying employees with cryptocurrency, it is taxed as a gross income taxes. The increase of peer to peer (P2P) and cryptocurrency ATM from third party distributers have decrease the ability for the Securities and Exchange Commission (SEC) to be able to correctly regulate and prevented the DOJ to monitor financial transactions for National Security threats.
3 The Solution: As a result of the repeated threats DOJ sees cryptocurrency provides, the DOJ says it seeks to regulate cryptocurrency to prevent national security risk. They discuss that they do not want to regulate it too much, they see cryptocurrency becoming the vehicle of innovation and in the age of Web 3.0. Web 3.0, is considered the third generation of the internet, called Human Computer Interaction (HCI) it is the process of feeding data into computers that allow them to build relationships between variables through Natural Language Process (NLP), Artificial Intelligence (AI) and Machine Learning (ML) to help make our work faster, and help humans in a whole new scale.
With that said, they want to create investigation and prosecutions generally. They will continue to investigate and prosecute P2P exchangers for money laundering and violating the Bank Secrecy Act (BSA). Will continue to work with all US Financial regulators including the FinCen, OFAC, the SEC, the CFTC and the IRS. That all individuals whom violate US Law from foreign countries will also be prosecuted. They will also be promoting law enforcement awareness and expertise. They will continue to invest in the innovation of cryptocurrencies to help stay on top of the complexity of platforms and technologies. They will dedicate resources to existing initiatives and groups that encourage law enforcement awareness and expertise in the space. As well as formalize training of investigators and prosecutors on the threats of cryptocurrencies, and strategies to address them in the private sector to build public-private partnerships. In addition, DOJ will be fostering cooperation with state authorizes and international cooperation's to promote comprehensive and international regulations. This means the virtual asset ecosystem maybe transformed globally in the next coming decades in the Web 3.0 era.
The United Nations Office on Drugs and Crime, are currently in the process of adopting their own regulatory frameworks that will mirror the US FATF’s developing approach to virtual assets.
What does this mean for the future for Cryptocurrency?
According to the US DOJ, the U.S Department of Defense recently issued a digital modernization strategy specify for the uses of blockchain technology with claims that it will provide effectiveness, efficiency and security. Also that the U.S Food and Drug Administration (FDA) released a detailed vision on how it plans to use blockchain for food safety-related purposes. As well as the Federal Reserve is actively conducting research and experimentation related to the distributed ledger technologies and the potential use of digital currencies with their partners, Massachusetts Institute of Technology (MIT) in hopes to build and test a hypothetical digital currency orientated to central bank uses.
They then go on to suggest that with Web 3.0 and the crypto ecosystem increasing, they need to confront and address threats, since that’s is what good public policy does. They will continue to do their part to enforce the law on all forms of future innovation and technology for the American people, as we continue to innovate in the future.
When cryptocurrencies like Bitcoin was first birthed, it was to keep a decentralized system that would refrain from regulations and a central power. It’s an algorithm system built to check on itself and prevent fraudulent behaviors with the need of users identifying themselves. Instead of the Government regulating the national security policy of cryptocurrency, they are using national security potential threats as a scapegoat to regulate and centralize a system through national and international policy. That would destroy the original purpose of cryptocurrency in the first place.
How will this transform the financial markets?
Abruptly after the announcement of the report by the DOJ, Square Co-Founder Jack Dorsey, added 1% ($50M) of his balance sheet in Bitcoin purchases. CNBC published an article that announced, the company is the owner of CashApp that allows users to currently purchase Bitcoin on it’s mobile platform. The company currently owns about 38,250 BTC.
In a recent press release, Square stated, “believes that cryptocurrency is an instrument of economic empowerment and provides a way for the world to participate in a global monetary system, which aligns with the company’s purpose,” the company said in a release.
The Chief Financial Officer (CFO), Amrita Ahuja stated, “We believe that bitcoin has the potential to be a more ubiquitous currency in the future. As it grows in adoption, we intend to learn and participate in a disciplined way. For a company that is building products based on a more inclusive future, this investment is a step on that journey.”
The future of cryptocurrency is the future, the transformation of financial markets and freedom and the tools will be a transformative vehicle. Although the vehicle may move down a direction, that was not anticipated by the curators of the space.
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