6 months ago
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The double-edged nature of cryptocurrencies has become increasingly apparent, particularly in their role in facilitating child sexual abuse material (CSAM). Speaking to crypto.news, former Whitehouse insider Moe Vela said he expects the government to intervene soon.
U.S. Senators Elizabeth Warren and Bill Cassidy have attacked the cryptocurrency sector, raising concerns about the matter. Federal agencies have been urged to enhance their capacity to detect and prosecute cryptocurrency transactions linked to CSAM.
Their call comes at a critical time when privacy-focused cryptocurrencies and mixing services have been identified as tools for laundering funds derived from CSAM, as detailed in recent studies by Chainalysis and the Financial Crimes Enforcement Network (FinCEN).
The senators’ concerns have prompted the Department of Justice (DOJ) to take action against platforms like KuCoin and Binance, which involved charges related to operating an unlicensed money-transmitting business and the processing of suspicious transactions. The call for tighter regulation and industry-wide oversight is evident as agencies continue to develop new tools and strategies to address the growing misuse of digital assets for criminal activities.
Offering his insights into this critical issue, Moe Vela, Senior Advisor to Unicoin and Former Senior Advisor to President Biden, shared his perspective in an exclusive interview.
Recent events have raised concerns about cryptocurrencies facilitating illegal activities like CSAM. With Senators Warren and Cassidy calling for tighter regulations, what impact do these proposed changes have on the crypto market, particularly in curbing illegal activities?
These horrific challenges are inevitable with the introduction of new currency or financial system. The fact that it was a bipartisan approach will bring the effort from the two Senators some extra viability for the implementation of some solutions. I predict that within the next year, our nation will have crypto regulation that I hope will be preventative in nature informational and empowering but NOT destructive of the sector. The federal government must fight the urge to over-regulate in a reactive manner. Healthy regulation is inevitable and necessary.
Building on the senators’ concerns, what regulations do you see as critical to mitigate the risks of cryptocurrencies enabling child sexual abuse materials (CSAM)?
I am confident that the ultimate result will be a U.S. regulatory environment as it relates to cryptocurrency that will mirror many of the parameters, restrictions and protections of the regulatory standards of traditional currency and financial systems.
Given the anonymity and decentralization of cryptocurrencies, which can enable illicit activities like the purchase of CSAM, how crucial is government involvement in fostering transparency and ensuring that cryptocurrencies are backed by real assets?
As a senior advisor to Unicoin, this is a topic I am quite passionate about. I do believe that the federal government has an integral role in creating a regulatory environment that fosters and encourages transparency, as well as asset-back cryptocurrencies. As I have said publicly for several years, buying Bitcoin could very possibly put you in business with nefarious forces and probably some of the world’s most dangerous dictators and nations. Not to mention, that with those early cryptocurrencies, you are simply buying and trading air. It is beyond my comprehension that investors would feel safe and confident in buying any security that is not asset-backed.
How can we strike a balance between regulation and fostering innovation to ensure compliance without stifling the industry?
I am one of those in the cryptocurrency sector who advocates for total transparency, and asset-backed and compliant crypto. The regulations that will be necessary and forthcoming will be less stringent and harsh, in my opinion, as it relates to the risk-mitigating nature of asset-backed, transparent and compliant crypto.
Drawing from traditional financial systems, how can safeguards be adapted to the decentralized nature of cryptocurrency to prevent misuse, especially in cases like CSAM transactions?
In several speeches on this topic the past few years, I have stressed how vital it is that we look at what has worked well in traditional financial systems and what regulations have been effective in the prevention of CSAM transactions and other egregious activities. We simply enact that which has worked and disregard that which was ineffective as the crypto regulatory parameters are developed and implemented. There is no need to completely reinvent the wheel. It’s a new and young frontier but lessons from the past will be vital in setting the tone for the sector’s regulatory future.
On a broader scale, given global financial and security standards, how important is international collaboration in framing regulations that address the use of cryptocurrencies in illegal activities?
The global nature of the cryptocurrency, digital and financial systems make it absolutely mandatory that the United States collaborate with allies around the world. It is imperative that crypto regulatory standards be respected, adhere to and enforceable across geographic lines. This digital age and blockchain knows no geographic boundaries so regulations, laws and policies must be geo-blind.
Finally, what proactive roles should cryptocurrency exchanges and wallet providers undertake to prevent the use of their platforms for illegal transactions, particularly involving CSAM?
First and foremost, every wallet provider and crypto exchange should not be waiting for regulations and guidance from the government. Everyone involved in the crypto and blockchain eco-system MUST be proactive and implement company policies and procedures that mitigate the risk of nefarious activities, including CSAM. In Texas where I grew up, we would say they need to take the bull by the horns.
So what do you suggest?
Play offense and don’t wait to play defense is a consistently strong approach when it comes to these regulatory and policy discussions. It is very important that the sector unite and be a part of the solution—waiting until the regulations are developed and implemented and then just complaining is irresponsible. Now is the time to get involved and be at the table as they are being developed and discussed.
