The Proactive Blockchain Industry

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ACAMS Todayspoke with Jason Weinstein of Steptoe to discuss the formation of the Blockchain Alliance (BA), the BA’s overall goals and its role in the blockchain community.

ACAMS Today: Tell us about BA and what led to its formation?

Jason Weinstein: The Blockchain Alliance is a nonprofit cofounded in 2015 by the Chamber of Digital Commerce and Coin Center. Alan Cohn and I lead the Alliance and our firm, Steptoe & Johnson LLP, serves as its counsel as a service to the blockchain industry.

The Blockchain Alliance provides a public-private forum for engagement and dialogue between the blockchain industry, law enforcement, as well as regulatory agencies in the U.S. and around the world. It is inspired by an effort in the mid-1990s, during the early days of commercial use of the internet, where the FBI sought assistance from tech companies in understanding how the internet worked so U.S. law enforcement could improve its capacity to go after criminals who were already misusing that technology to facilitate criminal activity. Within a few short years, the Department of Justice (DOJ) was teaching agents and prosecutors how to use the internet as an investigative tool. There have been other successful examples of these types of public-private partnerships, including the U.S. Secret Service’s Electronic Crimes Task Force program and the National Cyber-Forensics and Training Alliance.

The Blockchain Alliance facilitates the same sort of assistance to law enforcement in the crypto/blockchain space. The key difference here is that the industry was proactive. Instead of waiting for law enforcement to ask for help, the companies in the Alliance reached out to the government and said, “help us help you.”

AT: What are BA’s overall goals?

JW: Our primary goals are (1) to build trusted relationships between industry and government through education and engagement, (2) to leverage the dedication, expertise and insights of industry leaders to help enforcement agencies and regulators more effectively understand how the “on-ramps” and “off-ramps” between cryptocurrency and fiat can be policed, and (3) to help these government agencies deepen their understanding of cryptocurrencies and blockchain technology, enhancing their capacity to follow the (digital) money and protect public safety.

AT: Who are your main BA participants and what other industries or sectors do you hope will join BA in the future?

JW: The Alliance has grown rapidly, from just 15 private sector organizations and six U.S. federal agencies in 2015, to over 120 companies and government agencies today―including over 60 participating law enforcement and regulatory agencies in the U.S. and around the world. Among them are the DOJ, Department of Homeland Security, Treasury Department, Financial Crimes Enforcement Network, Federal Deposit Insurance Corporation, Federal Reserve, Securities and Exchange Commission, Commodity Futures Trading Commission, Interpol, Europol, as well as national police agencies from Canada, Mexico, Europe, Australia and Africa.

The companies that participate in the Alliance run the gamut, including cryptocurrency exchanges, payment service companies, blockchain infrastructure providers, stablecoin issuers, wallet providers, custodians, cryptocurrency issuers, decentralized finance (DeFi) platforms and blockchain analytics companies. What these companies all have in common is a commitment to work cooperatively with governments around the world to help improve their ability to do more informed and effective regulation and enforcement in this space.

AT: You recently created a Working Group for financial institutions (FIs). What is the Working Group’s mission?

JW: The goal of the Working Group is to provide the same type of education and engagement with FIs that we have done so successfully with government agencies. I know that it has been incredibly valuable for the regulators and enforcement agencies that participate in the Alliance to get unique insights into the highly sophisticated anti-money laundering, sanctions compliance and risk management programs in use at our member virtual asset service providers. Through the Working Group, we hope to provide the same type of insights for major FIs. Our hope is that these banks will develop greater comfort with having cryptocurrency companies as clients, through a more refined sense of how to assess risk in this space. But at a minimum, as cryptocurrencies increasingly become part of the fabric of our financial lives, it has never been more important for FIs to have productive dialogues with leading cryptocurrency and blockchain companies.

AT: What topics do your participants want to learn more about?

JW: One of the ways the Blockchain Alliance pursues its mission is through an ongoing series of webinars for which the topics are suggested by our government participants and the content is developed and presented by our industry participants. As you might expect, the topics that are top of mind for the government agencies evolve as the technology and its applications evolve, and we work hard to be responsive to these priorities. These webinars have reached an audience of over 1,000 agents, prosecutors, regulators and other government officials in nearly 35 countries around the world.

AT: How does BA hope to make a difference in the anti-financial crime industry?

JW: As anyone in law enforcement knows, criminals are early adopters of any new technology. There is a long history of bad actors using new-school technology to facilitate old-school crimes. Law enforcement agencies and regulators have had to learn to adapt to changes in technology time and time again. Perhaps the greatest example of this phenomenon is the internet itself. Cryptocurrencies and blockchain represent just the latest chapter in this cycle of innovation and adaptation. But we are big believers that cryptocurrencies are friendlier to cops and compliance officers than they are to criminals. The traceability, searchability, permanence and borderless nature of the blockchain provide real advantages to law enforcement agents, regulators and compliance officers. These same factors mean that law enforcement, regulators and compliance officers need to stay abreast of developments and changes in this technology. The key is educating government and compliance professionals about how to take advantage of those advantages. That is where the Blockchain Alliance comes in―we are a one-stop resource for government officials to benefit from the technical expertise and insights of leading cryptocurrency and blockchain companies.

Through education and engagement, we are helping to protect public safety. At the same time, we are promoting the growth of this industry by changing government agencies’ perceptions of the companies in this space for the better, and dialing down the level of anxiety over this transformative new technology among not just the people who enforce the laws and regulations, but also the people who write them. We have had a very successful first five years, and we look forward to continuing this important work in the years to come.

Interviewed by: Karla Monterrosa-Yancey, editor-in-chief, ACAMS, FL, USA, kmonterrosa@acams.org

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