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Lax global regulatory oversight of cryptocurrencies and other digital assets continue to make these attractive channels for laundering the proceeds of ransomware attacks and other crimes, U.S. President Joe Biden found in a new decree.

In an executive order signed Wednesday, Biden laid out the first-ever comprehensive U.S. strategy to retain its lead in spurring the growth of the cryptocurrency industry and boosting worldwide access to financial services while also mitigating any threats the sector may present to consumers, national security and financial stability.

“Poor or nonexistent implementation of [anti-money laundering] standards in some jurisdictions abroad can present significant illicit-financing risks,” the president found. “Growth in decentralized financial ecosystems, peer-to-peer payment activity, and obscured blockchain ledgers without controls … could also present additional market and national security risks.”

Biden’s order gives State, Justice, Treasury and other departments deadlines ranging from three to seven months to review how the U.S. may proceed in supporting the cryptocurrency sector and digital payment systems, curbing money laundering and other financial crimes, and creating a central bank-run cryptocurrency capable of promoting inclusion and economic growth.

The order also tasks Treasury, Justice and Homeland Security departments with reviewing the government’s current approaches towards investigating and prosecuting parties suspected of using cryptocurrencies for criminal purposes, and recommending revisions to relevant laws and rules that may facilitate the work of law enforcement.

U.S. officials must also follow-up on their recently published assessments of U.S. vulnerabilities to money laundering, terrorist financing and proliferation financing—as well as their forthcoming update of the government’s strategy for combating them—with a list of ongoing and proposed regulatory efforts to tackle the threats posed by cryptocurrency specifically.

Each of the three assessments, which Treasury published March 1, highlight the growing role that cryptocurrencies and their unregulated providers play in laundering the proceeds of crime, financing terrorism and funding the illegal development of nuclear arms and other weapons of mass destruction.

The Treasury Department plans to incorporate those findings into the National Strategy for Combating Terrorist and Other Illicit Financing, which was last updated in January 2020.

Biden’s “whole-of-government” approach to establishing a national legal and regulatory framework for cryptocurrencies follows similar, but narrower reviews of related rules that individual executive agencies, including the Office of the Comptroller of the Currency and Securities and Exchange Commission, have undertaken over the past several years.

Laurel Loomis Rimon, a former official with Justice’s Asset Forfeiture and Money Laundering Section and the Consumer Financial Protection Bureau, said the order implicitly acknowledges that mainstream adoption of cryptocurrencies has become inevitable, and, as such, adds impetus to efforts to ensure that regular consumers can use them safely.

Anti-money laundering concerns have thus far outweighed consumer protection concerns among regulators of the cryptocurrency industry, said Loomis Rimon, now a partner with the Paul Hastings law firm in Washington, D.C.

“Now, as with any mature industry, this too will have to find a happy medium,” she said.

Senior administration officials told reporters in a press call Tuesday that plans to bring these disparate reviews under one umbrella began six to nine months ago, as more U.S. firms, including a prominent pipeline operator and a large meat processor, fell victim to ransomware attacks that ultimately cost them tens of millions of dollars.

The Biden administration did not intentionally time the order to coincide with a barrage of sanctions against Russia for invading Ukraine, nor issue it as a response to speculation that Russian individuals and companies may increasingly rely on cryptocurrency to circumvent the new financial restrictions against them, the officials said on condition of anonymity.

“I will say [that] on Russia, in particular, the use of cryptocurrency we do not think is a viable workaround to the set of financial sanctions we’ve imposed across the entire Russian economy and, in particular, to its central bank,” one of the officials told reporters.

Russia’s invasion of Ukraine may, however, give the White House new momentum to advance global cooperation in strengthening anti-money laundering rules, financial stability and consumer protection for the cryptocurrency industry, officials said.

Contact Valentina Pasquali at vpasquali@acams.org