The Department of Justice (DOJ) has warned international exchanges that they must abide by U.S. law or face potential punishment by the federal government.
Last week, the DOJ publicized an 83-page cryptocurrency enforcement order outlining its take on the growing space and discussing possible crimes. The paper proposed the U.S. government would impose its laws despite where exchanges are based. In simple terms, these exchanges should observe U.S. laws – even for their non-U.S. customers:
“The Department also has robust authority to prosecute VASPs and other entities and individuals that violate U.S. law even when they are not located inside the United States. Where virtual asset transactions touch financial, data storage, or other computer systems within the United States, the Department generally has jurisdiction to prosecute the actors who direct or conduct those transactions.”
The report arrived days after prosecutors with the U.S. Attorney’s Office for the Southern District of New York (SDNY) made allegations against BitMEX, a crypto trading platform that is headquartered in Seychelles, with directors based outside the U.S.
Impact on exchanges
DOJ’s framework can have ramifications for international exchanges that may currently or previously had purchasers in the U.S. Exchanges that withdrew from the U.S could still be affected in light of BitMEX charges.
Nonetheless, this does not mean that every exchange situated outside the U.S. is in jeopardy or that the federal government will heavily scrutinize them. This is a notice for those who have had contact with the U.S. to remain alert.
The DOJ is aware that the U.S. has controverted the financing of terrorism for decades and has maintained high standards regarding cryptocurrency trading since 2011. Despite this, the framework criticizes some exchanges for using measures against U.S. customers that are not relevant to non-U.S. customers.
Jake Chervinsky, general counsel at Compound Finance, reported that policymakers are planning to increase global restrictions on trading online assets from how it was previously.