DSS has received a heavy volume of enquiries from the industry on whether ownership of cryptocurrencies should be reported by cleared persons or clearance applicants.

Owning Bitcoins can be a matter overseen by national defense bodies. On Monday, February 5, 2018, the United States Defense Security Service (DSS) published a clarification on reporting requirements with regard to cryptocurrencies.

DSS says it has received a number of questions from the industry as to whether ownership of cryptocurrencies, such as Bitcoin, should be reported by cleared persons or clearance applicants. DSS notes that there is no current Department of Defense guidance related to the reporting of ownership of cryptocurrencies. It adds, however, that it is working with DoD policy offices for further clarification and once such guidance is issued, DSS will ensure the widest dissemination to industry.

In the meantime, the number of regulatory actions against virtual currency scams is on the rise. In January this year, CFTC Enforcement Director James McDonald and SEC Enforcement Co-Directors Stephanie Avakian and Steven Peikin made a joint statement regarding virtual currency enforcement actions.

“When market participants engage in fraud under the guise of offering digital instruments – whether characterized as virtual currencies, coins, tokens, or the like – the SEC and the CFTC will look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws.

“The Divisions of Enforcement for the SEC and CFTC will continue to address violations and to bring actions to stop and prevent fraud in the offer and sale of digital instruments.”

A recent example of such an action is the lawsuit targeting Randall Crater, Mark Gillespie, and My Big Coin Pay, Inc., alleged to have misappropriated over $6 million from customers. The CFTC Complaint says that from at least January 2014 through January 2018, the Defendants fraudulently solicited potential and existing MBC customers throughout the United States by making false and misleading claims and omissions about MBC’s value, usage, and trade status, and that MBC was backed by gold. Defendants also allegedly fraudulently solicited numerous customers in the District of Massachusetts, receiving in excess of $5 million from those customers.