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In a significant policy shift, Deputy Attorney General Todd Blanche issued a memorandum titled “Ending Regulation By Prosecution,” on April 7, 2025, signaling a change in the Department of Justice’s (DOJ) approach to digital assets. The memorandum, outlines a move away from the previous administration’s enforcement efforts, which the memo called “reckless” and “ill conceived and poorly executed.” This shift aligns with Executive Order 14178 and President Trump’s vision to foster innovation within the digital assets industry without punitive regulatory measures.
Key Takeaways
The memorandum marks a pivotal change in how digital assets are treated by the DOJ, moving away from regulatory prosecutions to focus on criminal activities. Below are the main points of this policy shift:
- Focus on Individual Criminal Activity: The DOJ will now prioritize prosecuting criminal activity of individuals who cause financial hardship to digital asset investors and consumers and those who use digital assets to further criminal conduct, such as fentanyl trafficking, terrorism, cartels, organized crime, and human trafficking.
- Ceasing “Regulation by Prosecution”: At the same time, prosecutors are directed to stop pursuing cases related to regulatory violations by cryptocurrency entities. Investigations not aligned with the new focus on criminal activity are to be discontinued.
- Alignment with Administration Policy: This change aligns with President Trump’s executive order aimed at promoting innovation in the cryptocurrency sector by reducing regulatory hurdles.
- Disbandment of the NCET: The DOJ has dissolved the National Cryptocurrency Enforcement Team, established in 2022. The DOJ clarified that it does not serve as a regulatory body for digital assets. To that end, DOJ will no longer pursue cases that “superimpose[e] regulatory frameworks on digital assets.”
This policy shift reflects a transition towards addressing the criminal misuse of digital assets rather than focusing on regulatory compliance. (For more information, check out our recent blog posts on cryptocurrency regulation here and here.) What remains to be seen is whether DOJ’s move away from “regulation by prosecution” will apply more broadly and impact priorities related to other industries outside of digital assets that are not the subject of an Executive Order.
A New Focus on Digital Assets Enforcement
The digital assets industry is increasingly recognized as a component of modern economic development, with potential for innovation. The DOJ’s revised strategy focuses on ensuring clarity and certainty in enforcement policies, as directed by Executive Order 14178. The memorandum emphasizes that the DOJ “is not a digital assets regulator;” instead, it commits to prosecuting individuals who exploit digital assets for criminal activities.
Under the new framework, prosecutions will prioritize investigations and prosecutions that involve: (1) conduct victimizing digital asset investors (e.g., embezzlement and misappropriation of customers’ funds on exchanges, digital asset investment scams, hacking of exchanges, etc.); and (2) individuals who use digital assets to facilitate crimes such as terrorism, narcotics trafficking, human trafficking, organized crime, hacking, and cartel financing. This approach emphasizes investor protection and the security of digital asset markets, while delegating regulatory compliance to other bodies. The memorandum also notes the increasing reliance on digital assets by certain criminal elements and aligns with the administration’s focus on transnational criminal organizations, foreign terrorist organizations, and designated global terrorists.
Charging Considerations and Regulatory Clarity
A key aspect of the new policy is guidance for federal prosecutors on charging decisions. Prosecutors are instructed to prioritize cases holding individuals accountable for causing financial harm to digital asset investors or using digital assets in furtherance of criminal conduct. While the DOJ will pursue individuals and enterprises involved in these illicit activities, it will refrain from targeting platforms unless they are complicit. Cases based on regulatory violations, such as unlicensed money transmitting or violations of the Bank Secrecy Act, will not be pursued unless there is clear evidence of willful law violations.
It remains to be seen what impact, if any, this policy will have on ongoing criminal prosecutions. The memorandum notes that the DOJ “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 . . . .” Instead, the DOJ will now focus on individuals who use these technologies for illicit activities. Later this year, the DOJ is scheduled to put Roman Storm, co-founder of mixing service Tornado Cash, on trial for crimes including conspiracy to launder money and sanctions violations. This case raises questions about the liability of developers for open-source code used by others to commit crimes. However, the DOJ’s policy does not apply to 18 U.S.C. §1960(b)(1)(C), indicating that knowingly transmitting funds derived from or intended for illegal activities remains a prosecutable offense. (See additional blog posts about Tornado Cash here, here and here.)
The memorandum outlines a discretionary approach to charging violations under the Securities Act of 1933, the Securities Exchange Act of 1934, and the Commodity Exchange Act. Prosecutors are advised to avoid cases that require the DOJ to litigate the classification of a digital asset as a “security” or “commodity” unless no alternative criminal charge is available.
Compensating Victims in the Digital Assets Space
The memorandum addresses compensating victims of digital asset fraud, particularly after the market downturn in 2022. The DOJ acknowledges that current regulations may prevent victims from recovering the full value of lost assets, especially when asset values fluctuate significantly. To address this, the DOJ’s Office of Legal Policy and Office of Legislative Affairs are tasked with evaluating legislative and regulatory changes to improve asset-forfeiture efforts and ensure fair compensation for victims.
Reallocating Resources and Future Engagement
Aligned with the narrowed focus on digital asset enforcement, the DOJ will reallocate resources. The Market Integrity and Major Frauds Unit will cease cryptocurrency enforcement activities, and the National Cryptocurrency Enforcement Team (NCET) will be disbanded. However, the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) will continue to provide guidance and liaise with the digital asset industry.
Additionally, the DOJ will participate in the President’s Working Group on Digital Asset Markets, as established by Executive Order 14178. DOJ representatives will contribute to identifying and recommending regulatory and legislative measures that align with administration policies and priorities. This collaborative effort aims to shape a balanced regulatory environment that supports innovation while ensuring robust protections against criminal exploitation.
A New Stance on Crypto
The DOJ’s policy shift is part of a broader rollback of government efforts to regulate the crypto industry, with regulatory bodies like the Securities and Exchange Commission refocusing their enforcement strategies and banking regulators allowing some crypto activities. This realignment reflects President Trump’s campaign promises in the sector. .
Conclusion
The memorandum from Deputy Attorney General Blanche represents a significant shift in the DOJ’s approach to digital assets. By moving away from prosecuting virtual currency platforms, the DOJ aims to create a regulatory environment that encourages innovation while maintaining a focus on prosecuting individuals who victimize digital asset investors and preventing criminal misuse of digital assets. This strategy underscores the importance of balancing industry growth with robust enforcement measures to protect investors and national security.
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