DOJ Refocuses Crypto Enforcement Strategy

In a Memorandum for Department of Justice ("DOJ") employees, Deputy Attorney General Todd Blanche directed federal prosecutors to refocus efforts away from enforcement led regulation in the digital assets space. 

In line with President Trump's Executive Order 14178, Mr. Blanche emphasized that DOJ "will stop participating in regulation by prosecution." (See related coverage.).

According to the Memorandum, DOJ revised its approach across five areas:

1. Digital Asset Enforcement. Mr. Blanche stated that DOJ would focus on prosecuting individuals who "victimize digital asset investors" or use digital assets in connection with crimes like "terrorism, narcotics and human trafficking, organized crime, hacking, and cartel and gang financing." He said the Department "will no longer target virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their end users," except when consistent with the new priorities.
2. Charging Considerations. Mr. Blanche stated that criminal charges "premised on regulatory violations" without evidence of willful misconduct should be deprioritized. Prosecutors are instructed to focus on cases that involve "financial harm to digital asset investors and consumers" or where digital assets are used to commit serious crimes. Mr. Blanche also instructed prosecutors to avoid litigating whether a digital asset is a "security" or "commodity" when alternative charges like wire fraud are available, but they may pursue securities fraud charges when equity is at issue.
3. Compensating Victims. Mr. Blanche stated that current regulations could limit restitution for victims to the asset's value at the time of fraud, preventing them from benefiting "from corresponding gains" afterward. He directed the Office of Legal Policy and the Office of Legislative Affairs to propose changes to improve asset-forfeiture outcomes for digital asset investors.
4. Shifting Resources. Mr. Blanche said that the National Cryptocurrency Enforcement Team ("NCET") is to be disbanded, and the Market Integrity and Major Frauds Unit will end its crypto enforcement role. 
5. The President's Working Group. Mr. Blanche stated that DOJ will fully participate in the President's Working Group on Digital Asset Markets. He underscored that DOJ representatives will help identify and recommend regulatory or legislative proposals and "take all steps necessary to implement" recommendations made by President Trump.