The potential for bad actors to exploit cryptocurrency is a top concern for one of the Biden Administration’s senior cybersecurity officials.
Citing crypto’s role in ransomware attacks, sanctions evasion and terrorist financing, Carol House, the director of cybersecurity and secure digital innovation at the National Security Council, argued Thursday that the tech’s backend demands some scrutiny, especially for unhosted wallets.
“A lot of the developers in the space created the systems without building in the kinds of protections that are needed for longstanding obligations,” House said during a Consensus 2021 panel on crypto regulation in the Biden White House.
She acknowledged that most crypto users aren’t bad actors – but some may be. She cited ISIS terrorists and North Korean hackers as potential recipients of “large amounts of value” that the government cannot control.
Against this, House said it is essential, and indeed reasonable, that the U.S. government step in with “obligations and controls” for crypto. “Traditional payments” already play by federal rules, she pointed out.
What those controls might look like in crypto remains a topic of heated debate. House told panel moderator Amanda Wick of crypto analytics firm Chainalysis that all policy options are on the table. Earlier Thursday, Michael Mosier, acting director of FinCEN, said his financial regulatory agency has made no decisions yet.
House echoed that sentiment. “I think it’s been very clear that we haven’t taken a position of banning it or making it illegal at all,” she said of crypto. But she hinted that controls should be introduced to address the potential for what regulators consider criminal misuse.
“The ability of the space to enable instantaneous disintermediated value transfer can pose significant illicit finance and other risks when appropriate controls aren’t put in place,” she said.
Government regulators and industry representatives should work together on developing guardrails for crypto, House said.