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Since President Donald Trump took office, US authorities have increasingly abdicated responsibility for policing crypto-related offenses. Attorneys and lawmakers fear the resulting enforcement vacuum could be used to violate rules with impunity.
While running for office, Trump repeatedly declared himself a champion of bitcoin, and members of his family have become thoroughly entangled with the crypto industry. Over the past few months, his administration has set about unravelling Biden-era crypto enforcement policies thread-by-thread, defanging the civil enforcement division that previously targeted the crypto industry and pardoning crypto executives who had pleaded guilty under the previous regime. Now, the Department of Justice is retreating from crypto enforcement as well.
On Monday evening, in a letter addressed to all DOJ employees, deputy attorney general Todd Blanche announced that the agency would deprioritize certain criminal prosecutions against crypto businesses, including failures to prevent money laundering and obtain money transmission licenses. As part of the change, the DOJ will disband its National Cryptocurrency Enforcement Team (NCET), a unit that specializes in investigating crypto-related criminality.
“The prior administration used the Justice Department to pursue a reckless strategy of regulation by prosecution, which was ill conceived and poorly executed,” the letter stated. “The Department will no longer target virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their end users or unwitting violations of regulations.”
The DOJ will continue to prosecute individuals who use crypto in crimes including terrorism, drug trafficking, hacking, and other high-priority offenses. But the agency’s new stance implies that crypto businesses will be allowed to play fast and loose with certain statutes, at least until regulators come out with a rulebook for the industry, experts say.
“The rollbacks send the message that they are really not going to prosecute people for crypto-related crimes or regulatory violations unless it involves something severe,” claims Christopher LaVigne, a former US prosecutor and partner at law firm Withers. “The hope is that we get more clarity—a workable system that prevents fraud, protects consumers, and allows the field to innovate. The fear is what happens in the vacuum.”
The DOJ did not respond immediately to a request for comment.
The DOJ’s deprioritization of crypto enforcement follows a similar retreat by the Securities and Exchange Commission, the financial regulator that pursued the crypto industry most doggedly under former president Joe Biden, which has recently withdrawn from multiple cases filed against high-profile crypto firms. “The dismantling of the SEC enforcement program is mammoth,” one former SEC staffer told WIRED in February.
Elsewhere, the SEC has distanced itself from oversight of memecoins, a class of crypto coin that typically has no strict purpose but to act as a vehicle for financial speculation, which are frequently abused to squeeze money from unwitting investors. Shortly before the inauguration, Trump and his wife Melania launched memecoins of their own.
In late March, the president pardoned the cofounders of crypto exchange BitMEX, who in 2022 pleaded guilty to charges relating to their failure to maintain an adequate anti-money-laundering program, a move that followed the pardoning of Silk Road creator Ross Ulbricht, whose case had become a cause célèbre in crypto circles. A month after Chinese entrepreneur Justin Sun announced he had invested $75 million in World Liberty Financial, a crypto project with ties to the Trump family, the SEC petitioned a federal judge to pause its ongoing fraud case against him and several of his companies. (A status report on the case is expected to be submitted this spring.)
Meanwhile, the Trump family’s crypto empire continues to expand. In late March, Eric Trump and Donald Trump Jr., the president’s sons, announced a new bitcoin mining venture. Shortly before that, the parent company of Truth Social, Trump’s social media platform, entered an agreement to launch a series of crypto-exchange-traded funds. President Trump himself has previously issued NFTs, in addition to his memecoin.
At least until July, by which time the US government’s new “working group on digital assets” is required to recommend an approach to overseeing the crypto industry, it will remain unclear which laws and regulations will be enforced against crypto businesses—and by whom. “There was a pretty clear sheriff in town: [former SEC chair Gary] Gensler. Now there’s not,” says LaVigne.
Though the new DOJ orders do not prohibit prosecutors from investigating crypto businesses, the practical realities of the job—the way budget is allocated, how investigations are staffed, the possibility that supervisors may decline to proceed with a case—mean they achieve a similar result, says Daniel Silva, another former prosecutor and attorney at law firm Buchalter.
“If I’m a prosecutor, I’m not sure I’m interested,” says Silva. “If I’m doing long-term, complex financial investigations involving international fraud, I can manage three or four at a time. Am I going to spend years on a [crypto] case that might get declined?”
The upshot is likely to be that crypto firms are left alone to pursue experimental types of crypto tokens, transactions or products, even if they stretch the limits of applicable laws. “If you’re a cryptocurrency company right now, you have a bit more certainty that over the next couple of years your risk tolerance might expand without getting punished as much as it would have,” says Silva.
In a letter to the DOJ on Thursday, six Democratic senators argued that loosening the grip on platforms responsible for the flow of crypto assets will lead to dangerous downstream outcomes too. “Drug traffickers, terrorists, fraudsters, and adversaries will exploit this vulnerability on a large scale,” the letter states.
The DOJ’s position may not, though, be the free pass that it seems, claims Joshua Naftalis, a former prosecutor who is currently a partner at law firm Pallas Partners. Although the DOJ is likely to pursue only a few crypto-related cases under Trump, he says, businesses cannot be assured that present day infractions will not be punished by future administrations. That should temper the crypto industry’s willingness to flout, say, anti-money-laundering requirements.
“I’m sure it’s a breath of relief for the crypto industry,” says Naftalis. “But there’s a statute of limitations. A different president could always go back and charge these cases. It would be a false sense of security.”
Equally, the DOJ will continue to draw a hard line at fraud, the former prosecutors claim. “You cannot just commit flagrant financial crimes and expect no one to look at it,” says Silva.
There is a degree to which all parties—from crypto businesses to the prosecutors tasked with these new orders—will be required to read between the lines. “The signal is that the industry is not in the doghouse anymore,” says Naftalis. “They still have to comply with the laws. The question is which ones will be enforced—and by whom?”
