U.S. DOJ Scraps Crypto Enforcement Team, Opens Door to Digital Asset Boom

Established in 2022 under the Biden administration, the NCET was tasked with addressing the illicit use of cryptocurrencies. However, Deputy Attorney General Todd Blanche criticized the previous approach as a "reckless strategy of regulation by prosecution." In a recent memo, Blanche emphasized that the DOJ will now prioritize cases involving individuals who misuse digital assets in connection with unlawful activities such as fraud, unauthorized access, and other serious violations of the law. Prosecutors have been instructed to close ongoing investigations that do not align with this updated directive.

Under the new policy, the DOJ will cease targeting virtual currency exchanges, mixing and tumbling services, and offline wallets for the actions of their end users or for unwitting regulatory violations. Prosecutors are also advised against charging regulatory violations under federal banking, securities, and commodities laws unless there is evidence of intentional misconduct.

This policy change is expected to have a profound impact on ongoing and future cases involving cryptocurrency firms. For instance, Roman Storm, a founder of the cryptocurrency mixing service Tornado Cash, was previously charged with facilitating over $1 billion in illicit transactions. Storm's defense argued that he was unfairly targeted for the actions of third parties using his service. The DOJ's revised stance could influence the outcomes of such cases.

President Trump has frequently expressed support for the digital asset industry, advocating policies aimed at fostering innovation and reducing regulatory barriers. His administration has taken several steps to encourage growth and broader adoption of cryptocurrencies, including executive actions promoting access and development in the sector.

Under President Trump's administration, the U.S. Securities and Exchange Commission has notably scaled back its enforcement actions against cryptocurrency firms. Reflecting the administration's broader stance in favor of cryptocurrency innovation, the SEC recently closed numerous ongoing lawsuits, signaling a more collaborative and less adversarial regulatory approach toward digital asset companies.

The DOJ's decision has elicited varied reactions. Proponents of the cryptocurrency industry view it as a positive step toward fostering innovation and reducing regulatory burdens. Conversely, critics express concerns that scaling back enforcement could embolden bad actors and increase the risk of illicit activities facilitated by digital assets.

This development occurs amid other significant events in the financial and regulatory landscape. For example, the European Securities and Markets Authority (ESMA) recently warned about potential financial stability risks posed by the growing cryptocurrency industry, highlighting the increasing integration of crypto with traditional finance.

The DOJ's move to disband the NCET and shift its focus reflects the Trump administration's broader agenda to support the digital assets industry by reducing regulatory oversight. While this policy change is welcomed by some within the crypto community, it raises questions about the potential implications for financial crime enforcement and the overall stability of financial markets.