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Combating the illicit use of digital assets

Since its creation in 1865, the United States Secret Service has been tasked with safeguarding the integrity of the nation’s economy. Initial efforts focused on putting an end to rampant counterfeiting taking place in the years following the American Civil War, a time in which as much as 30% of circulating currency was thought to be illicit. As individuals and organized networks evolved and sought new ways to defraud the public, special agents and criminal investigators with the Secret Service have responded, applying their experience and expertise to preventing other financially motivated crimes such as illicit credit card schemes, fraudulent wire transfers, computer fraud and abuse, and, most recently, the illicit use of digital assets, including cryptocurrencies to facilitate crimes like ransomware attacks.

What are digital assets?

The term digital assets refers broadly to representations of value in digital form, regardless of legal tender status. For example, digital assets include cryptocurrencies, stablecoins and nationally backed central bank digital currencies. Regardless of the label used, or the various definitions ascribed to them, digital assets can be used as a form of money or be a security, a commodity or a derivative of either. Digital assets may be exchanged across digital asset trading platforms, including centralized and decentralized finance platforms, or through peer-to-peer technologies.

Why does the Secret Service investigate the use of digital assets?

The Secret Service is responsible for detecting, investigating, and arresting any person who violates certain laws related to financial systems. In recent years digital assets have increasingly been used to facilitate a growing range of crimes, including various fraud schemes and the use of ransomware. 

While the United States has been a leader in setting standards for regulating and supervising the use of digital assets for anti-money laundering and countering the financing of terrorism purposes, poor or nonexistent implementation of those standards in some jurisdictions abroad is presenting significant illicit financing risks that harm the American people and our foreign partners. For example, transnational organized criminals often launder and cash out their illicit proceeds using digital asset service providers in jurisdictions that have not yet effectively implemented international standards. 

The ongoing growth in decentralized financial ecosystems, peer-to-peer payment activity and obscured blockchain ledgers presents additional risks to the American people and our foreign partners. When digital assets are abused and used in illicit ways it is in the national interest to take actions to mitigate these risks through law enforcement action and other government authorities. The U.S. Secret Service is committed to doing its part to safeguard the nation from illicit activity involving digital assets.

Useful Definitions


 

Address

Address

Used to receive and transfer digital assets between users. Addresses are managed and stored within wallets. Addresses range in character length and type, but usually consist of long alphanumeric strings.

Altcoin

Altcoin

Typically any cryptocurrency that is not Bitcoin. An altcoin can be a divergent of the Bitcoin consensus model or a cryptocurrency that is linked to other types of blockchains or proofs of work. For example, Ether is one of the most well- known altcoins and is associated with the Ethereum network.

 

Central bank digital currencies

Central bank digital currencies

A form of digital money, denominated in the national unit of account, which is a direct liability of the central bank.

 

Stablecoins

Stablecoins

A category of digital currencies with mechanisms aimed at maintaining a stable value.

Cryptocurrency

Cryptocurrency

Refers to a digital asset, which may be a medium of exchange, for which ownership records are generated and supported through a decentralized distributed ledger technology that relies on cryptography, such as a blockchain.

Wallet

Wallet

Software programs that interface with blockchains and generate and/or store public and private keys used to send and receive cryptocurrency. A public key or an address is akin to an email address, and a private key is akin to a password.

 

Bitcoin

Bitcoin

A type of cryptocurrency. Payments or transfers of value made with bitcoin are recorded in the Bitcoin blockchain and thus are not maintained by any single administrator or entity.

Digital asset service provider

Digital asset service provider

A custodian that allows users to buy, sell, store and trade digital assets. Forms of digital asset service providers include exchanges, digital asset ATMs and over-the-counter brokers. There are many such providers operating in the United States.

 

Blockchain

Blockchain

A decentralized distributed ledger technology where data are shared across network participants and the data are typically linked using cryptography to maintain the integrity of the ledger and execute other functions, including transfer of ownership or value.

Virtual currency

Virtual currency

A medium of exchange that can operate like currency but does not have all the traditional attributes of “real” currency, including legal tender status.

  • DIGITAL ASSETS

    Cryptocurrency Investment Scams

    Cryptocurrency Investment Scams.pdf

    The U.S. Secret Service has observed a significant increase in cryptocurrency and digital asset investment scams in the past 12 months. These scams often target victims who are users of social media, online dating, or professional networking platforms. These scams will continue to evolve, particularly with the increased popularity of Non-Fungible Tokens (NFTs).

Investigating the illicit use of digital assets

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