For years, cryptocurrency has been viewed as a safe haven for criminal groups and businesses looking to launder ill-gotten gains. Unlike a bank account, cryptocurrency does not require a name attached to transactions that are recorded on a public blockchain ledger. This apparent anonymity attracted criminal enterprises in the early days of cryptocurrencies like Bitcoin. “You had Silk Roads around the world and AlphaBays,” says Jesse K. Liu, a partner at the law firm Skadden, Arps, Slate, Meagher & Flom. A former deputy general counsel at the US Treasury who also served at the Justice Department, Liu has prosecuted several crypto cases. “Early reports about Bitcoin portrayed it as some sort of secret, anonymous currency that bad guys used to do bad things.” The platform’s founding principles—and the libertarian, privacy-loving, decentralized attitude that spawned it—contributed to the perception that virtual currencies cannot be tracked.
What all of these groups and individuals overlooked was that the foundation of cryptocurrencies – the immutable blockchain that keeps a record of every transaction that takes place – was building a stockpile of evidence for prosecutors. “The thing that’s so unique about cryptocurrency is that you can actually track and trace the flow of these funds in a completely open ledger,” Redbord says. “It’s only because crypto moves and lives in an open ledger on the blockchain that this type of investigation has allowed.”
In the statement, Faruqi explained how the defendant’s identifying information and IP address were tracked and linked to the payment platform they operated. “What’s striking is that cryptocurrency has quickly become this dark asset used for illegal activity, which was never intended, and that is now being turned upside down and will just as quickly become more transparent than traditional asset classes,” says Nimesh Shah, CEO of London-based accountancy firm Blick Rothenberg. Others go further: “Judge Farooqui’s opinion pours cold water on the idea that cryptocurrencies spell the death of sanctions,” said Anupam Chander, a law professor at Georgetown University in Washington, DC. Chander says the opinion is good for cryptocurrencies as they seek to shake off their early bad reputation and gain mainstream traction: “Judge Faruqi treats virtual entities like dollars or dinars.”
While the court’s opinion sets a legal precedent that crypto transactions can and should be tracked by authorities, it is otherwise completely unremarkable. “Judge Faruqi is, to my knowledge, the first judge to actually say specifically that cryptocurrency could face sanctions,” Liu says. “But that’s been the Treasury Department’s view for several years.” What’s important about the decision is that it codifies what has long been an informal attitude toward crypto.
