US Treasury Tightens Virtual Asset Rules, Boosts AI Use

The United States Treasury Department has unveiled its biannual National Strategy for Combatting Terrorist and Other Illicit Financing. This newly published document outlines four main recommendations that are anticipated to influence virtual assets in various ways. The strategy acknowledges the challenges law enforcement faces in keeping pace with rapidly evolving financial technology.

The first priority outlined by the Treasury focuses on addressing regulatory deficiencies in Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT). It stresses the importance of establishing a more targeted and effective supervisory framework. The Treasury plans to assess whether additional actions are necessary for sectors that are not currently subject to comprehensive AML/CFT measures.

Another key component of the strategy is to enhance enforcement efforts. The document highlights the significant increase in new payment channels and financial service providers over the past decade, including virtual asset service providers (VASPs). This surge has stretched the limited supervisory resources traditionally allocated to more conventional money service businesses (MSBs).

One of the notable aspects of the strategy is its emphasis on blockchain technology. The Federal Bureau of Investigation’s Virtual Assets Unit is mentioned as a critical asset, providing technological tools, blockchain analysis, and training on virtual asset seizures. This unit also offers sophisticated virtual asset training for FBI personnel, demonstrating an institutional commitment to understanding and regulating virtual assets.

The Treasury aims to support responsible technological innovation while mitigating risks associated with illicit finance through a broad spectrum of measures. The strategy advocates for increasing inclusivity within the financial system and combatting the practice of derisking. Derisking involves denying all correspondent services to small banks in regions with high illicit activity, which can adversely affect legitimate users of banking services. This can lead to a greater reliance on crypto-based payment solutions that do not require traditional banking.

Creating more efficient cross-border payment systems and regulated money transfer options is also a priority. The strategy points to initiatives such as the G20 Roadmap and the FedNow domestic transfer system as exemplary implementations. By developing these systems, the Treasury aims to streamline international financial transactions and ensure they are conducted within a regulated framework.

Notably, the strategy also highlights the potential role of artificial intelligence (AI) and digital identity in achieving its goals. The document states that regulatory and policy support will be provided for reliable digital identity solutions. There is a plan to expand the use of AI and data analytics in the U.S. government’s efforts to uphold U.S. standards, practices, and values in payment systems. AI can enhance regulatory and enforcement efforts but can equally be exploited by those seeking to abuse the financial system.

The Treasury’s National Strategy for Combatting Terrorist and Other Illicit Financing outlines a comprehensive approach to tackle financial crimes in the digital age. By addressing regulatory gaps, enhancing enforcement, leveraging blockchain technology, and promoting technological innovation, the strategy aims to safeguard the financial system while encouraging responsible development within the sector.

10 thoughts on “US Treasury Tightens Virtual Asset Rules, Boosts AI Use

  1. The integration of AI and blockchain in regulatory efforts showcases a modern and comprehensive strategy. Can’t wait to see the results!

  2. Enhancing regulatory frameworks is a crucial step in safeguarding our financial systems from illicit activities. Well done!

  3. Finally, some much-needed updates to AML/CFT measures! This will really help in keeping pace with the rapidly changing financial landscape.

  4. Thrilled to see the Treasury fostering responsible technological innovation while tackling illicit finance. A balanced approach is exactly what we need.

  5. AI and data analytics in AML/CFT efforts? Brilliant! This will definitely enhance our regulatory and enforcement capabilities.

  6. Derisking sounds good on paper, but in practice, it can isolate regions and push them towards unregulated sectors 🏦➡️💻. Great job, Treasury.

  7. This new strategy is a game-changer! Addressing regulatory deficiencies and including AI in the fight against financial crimes is so forward-thinking.

  8. It’s frustrating that the Treasury is just now realizing how far behind they are . These regulatory deficiencies should’ve been addressed years ago!

  9. The emphasis on AI and digital identity shows a commitment to future-proofing our financial systems. Way to go, Treasury!

  10. Enhancing enforcement sounds like code for more government spying on our transactions . No thanks.

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