DOJ Announces Shift in Crypto Enforcement and End of "Regulation by Prosecution"

On April 7, 2025, Deputy Attorney General Todd Blanche issued a memorandum announcing significant changes to the Department of Justice's (DOJ) approach to digital asset enforcement. The memo announces the end of “regulation by prosecution,” outlines the immediate disbandment of the National Cryptocurrency Enforcement Team (NCET) and promises a shift away from prosecuting digital asset platforms for the actions of their users. While surprising in making a public statement that it will no longer focus on certain segments of the cryptocurrency and blockchain market (putting aside whether or not one is breaking the law), the DOJ, SEC and greater Trump Administration have clearly departed from the Biden Administration in fostering a more open and permissive regulatory and prosecutorial environment.

Key Points:

  1. Disbandment of the NCET: Established in 2022 under the Biden Administration, the NCET was often seen by critics as opening investigations into digital asset projects solely for being a digital asset project. The current DOJ leadership argued this approach constituted “regulation by prosecution,” which they say they are ending.
  2. Focus on Bad Actors: The DOJ says it will prioritize prosecuting those who defraud digital asset investors or use crypto to facilitate crimes such as terrorism, narcotics and human trafficking, organized crime, hacking, and illicit financing.
  3. Limiting Platform Liability: The department will no longer target crypto exchanges, mixing and tumbling services, and offline wallets for the actions of their end users or for inadvertent regulatory violations. This is an important go-forward principle that was also supported by the Second Circuit in the civil context in their Risley v. Uniswap Labs decision.
  4. Regulatory Violations Require Willful Intent: Significantly, prosecutors are instructed not to pursue charges for regulatory violations under federal banking, securities and commodities laws (such as violations of money transmission licensing rules under Section 1960(B)(1)(A) and (B)) unless there is evidence of willful intent to violate licensing or registration requirements.
  5. Check the Footnotes: Footnote 2 in the memo says that prong (C) of the criminal money transmission statute is “outside the scope of this policy”. Unlike Sections 1960(b)(1)(A) and (B), which are licensing and registration focused, Section 1960(b)(1)(C) is a criminal violation that “involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity.” This carve-out seems designed to give the DOJ flexibility to maintain criminal cases against some defendants, such as Tornado Cash and Samurai Wallet, and optionality for bringing future cases against platforms or software developers that fall within this bucket.

Why it Matters:

  • This is a very public shift of DOJ resources and approach, which is unusual and will notably decrease the risk of criminal enforcement for good-faith operators and innovators seeking to build crypto products in the U.S. Many developers have relied on 2019 FinCEN Guidance on what a “money transmitting business” is for the past six years, and they can now rest assured that such reliance will not result in criminal liability.
  • Prioritizing going after bad actors and not developers who create technology (platforms, front-ends, wallets, etc.) will likely encourage crypto tech development in the U.S.  
  • This policy shift may impact several high-profile cases, including those against developers of platforms like Tornado Cash and Samurai Wallet. Brian Klein, defense attorney for Roman Storm, a developer charged with criminal violations because of his association with Tornado Cash, stated, “We read this memo as supporting the dismissal of the case against Roman. As we've said all along, it should never have been brought.”
  • While much has been made about the strict enforcement and prosecutorial environment under President Biden, it remains to be seen if this action will tip the scales too far in the opposite direction, which could result in more risk, fraud and sharp practices.

What’s Next:

Until Congress passes new legislation, this policy guidance can change during this administration or the next, and courts can set new legal precedent in this area if the Tornado Cash and Samurai Wallet cases continue. Updated FinCEN guidance would be helpful to clarify how to apply money transmission laws to DeFi and other crypto businesses alongside this updated DOJ policy. It will be incumbent for the industry to work with regulators to create a regulatory regime that deters criminal activity, protects consumers and doesn’t penalize new tech developers who build in the U.S.

In short, as with most of the regulatory shifts by the Trump Administration over the last few months, this is a positive signal for the digital asset industry in the United States.

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