On April 7, 2025, Deputy Attorney General Todd Blanche issued a memorandum instructing federal prosecutors to cease pursuing "litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets," noting that regulators and not prosecutors will "do this work outside the punitive criminal justice framework."1 Under the new policy, the Justice Department will prioritize investigations and prosecutions involving individuals who defraud investors in digital assets or who use digital assets in furtherance of other crimes, including offenses related to terrorism, narcotics trafficking, human trafficking, organized crime, hacking, and cartel and gang financing. The memorandum indicates that the Justice Department plans to close all ongoing investigations that are inconsistent with the new policy.
Background
Since taking office, President Trump has promised to "end the regulatory weaponization against digital assets."2 In furtherance of that goal, the President issued two Executive Orders containing directives aligned with the guidance in the recent Justice Department memorandum. Executive Order 14178 tasks the Justice Department and others with protecting and promoting (1) the ability of individual citizens and private-sector entities alike to access and use for lawful purposes open public blockchain networks without persecution and (2) fair and open access to banking services for all law-abiding individual citizens and private sector entities alike.3 Separately, Executive Order 14157 directs the Justice Department to prioritize cases involving the use of digital assets in furtherance of unlawful conduct by cartels, Transnational Criminal Organizations, Foreign Terrorist Organizations, and Specially Designated Global Terrorists.4
Charging Considerations
Consistent with the Executive Orders, the new memorandum instructs federal prosecutors to consider the following factors when deciding whether to pursue criminal charges involving digital assets:
- Prosecutors will prioritize investigations and enforcement actions against individuals who (a) cause financial harm to investors and consumers; and/or (b) use digital assets in furtherance of criminal conduct.
- Prosecutors should not charge "regulatory violations" in cases involving digital assets—defined to include unlicensed money transmitting under 18 U.S.C. §1960(b)(1)(A) and (B), violations of the Bank Secrecy Act, unregistered securities offering violations, unregistered broker-dear violations, and other violations of the registration requirements under the Commodity Exchange Act—unless there is evidence the defendant knew of the licensing or registration requirement and willfully violated it.
- Prosecutors should not charge violations of the Securities Act of 1933, the Securities Exchange Act of 1934, the Commodity Exchange Act, or the regulations promulgated pursuant to these acts in cases where (a) the charge would require the Justice Department to litigate whether a digital asset is a security or commodity, and (b) there is an adequate alternative criminal charge available.5
Prosecutors who pursue cases that involve exceptions to these policies must first obtain approval from the Deputy Attorney General. While the memorandum indicates that regulatory violations should be pursued by regulatory agencies, the director of least one regulatory agency—Caroline Pham, Acting Chairman of the Commodity Futures Trading Commission (CFTC)—issued a press release instructing the CFTC enforcement division and staff to comply with many of the provisions in the newly announced Justice Department policy.6 Meanwhile, the SEC has made clear from the early days of the Trump administration that its enforcement efforts in the digital asset space will be limited to fraud cases and the agency has systematically closed or dismissed ongoing enforcement matters based on non-fraud regulatory violations.7
Key Takeaways
The new memorandum represents a shift in tone and emphasis at the Justice Department when it comes to digital assets, as well as a significant redistribution of prosecutorial resources. The Department's National Cryptocurrency Enforcement Team is disbanded, and the Fraud Section's Market Integrity and Major Frauds Unit is directed to cease cryptocurrency enforcement. Nonetheless, the Department's criminal enforcement involving cryptocurrency will continue. The Department will continue to pursue and prioritize investment frauds and other fraud schemes involving cryptocurrency that victimize investors, as well as money laundering and illicit finance schemes involving cryptocurrency, particularly where such schemes relate to cartels, transnational criminal organizations (TCOs), human trafficking and human smuggling, or terrorism. The memorandum also indicates that prosecutors will continue to pursue criminal cases where exchanges or wallets are hacked, resulting in the theft of digital assets.
The new guidance is unclear, however, when it comes to the Justice Department's approach to cryptocurrency exchanges and other platforms. The memorandum states that the Department "will no longer target virtual currency exchanges, mixing and tumbling services, or offline wallets for acts of their end users or unwitting violations of regulations—except to the extent the investigation is consistent with the priorities articulated" in the memorandum. The memorandum further states that the Department "will not pursue actions against the platforms that criminal enterprises utilize to conduct illegal activities." However, in describing the circumstances in which prosecutors can pursue registration and Bank Secrecy Act charges against platforms—i.e., where a platform knew of a regulatory requirement and willfully violated it—the guidance leaves a viable pathway for prosecutors to bring enforcement actions against digital assets platforms, particularly given the Financial Crimes Enforcement Network's (FinCEN) longstanding guidance about how regulations relating to money services businesses (MSBs) apply to business models involving virtual currencies.8 Taken together, this aspect of the memorandum and FinCEN's regulation of certain virtual currency businesses as MSBs suggest that exchanges and other platforms will continue to face enforcement risk. Despite clarity on certain essential points about the future of DOJ crypto enforcement, much remains unsettled and will require nuanced analysis following Justice Department activity going forward to understand the scope of these changes.
As noted, the memorandum instructs prosecutors to close ongoing investigations that are inconsistent with the policy. Time will tell whether the Department will apply the policy to charged and pending cases as well. Last month, the President pardoned several individuals, along with an exchange, that had been convicted of violating the Bank Secrecy Act.9
The guidance also focuses on asset forfeiture and using the remission process in cryptocurrency cases to compensate victims. Specifically, it highlights that, under the remission regulations, digital asset investor victims are able to recover only the value of their digital assets at the time the fraud was committed.10 The guidance directed the Department's Office of Legal Policy and Office of Legislative Affairs to evaluate and propose legislative and regulatory changes to address this issue and potentially allow victims to receive additional compensation where the value of digital assets increases after the fraud was complete and the victims would have benefited from those gains if not for the fraud. This approach may signal a broader interest—beyond cases involving digital assets—in prioritizing white collar cases where there are victims—including a wide variety of investment fraud schemes.
The policy continues the Trump Administration's trend of adopting a crypto-friendly regulatory approach. For years, proponents of digital assets have criticized "regulation by enforcement" by the SEC and other regulatory agencies, arguing that reliance on enforcement actions to regulate digital assets has resulted in an environment hostile to innovation and conducive to fraud.11 The Justice Department's new policy, which targets "regulation by prosecution," appears to be extension of that rallying cry. Even under the new policy, however, the Justice Department will continue to prioritize fraud, money laundering, and hacking cases involving cryptocurrency, and may even continue to hold digital asset platforms accountable when, for example, they willfully fail to register with FinCEN and implement an effective anti-money laundering program. After all, a platform that fails to implement such a program—like any financial institution that fails to do so—is all the more likely to be used by terrorists, cartels, human smuggling organizations, and other TCOs.
1 Dep't of Justice, Ending Regulation By Prosecution (April 7, 2025) available here.
2 See id.
3 Exec. Order Strengthening American Leadership in Digital Financial Technology (Jan. 23, 2025) available here.
4 Exec. Order Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists (Jan. 20, 2025) available here.
5 Dep't of Justice, Ending Regulation By Prosecution (April 7, 2025) available here.
6 CFTC, Acting Chairman Pham Lauds DOJ Policy Ending Regulation by Prosecution of Digital Assets Industry and Directs CFTC Staff to Comply with Executive Orders (Apr. 8, 2025) available here.
7 Statement, Comm'r Hester M. Peirce, Getting Back on Base: Statement of Commissioner Hester M. Peirce on the Dismissal of the Civil Enforcement Action Against Coinbase (Feb 27, 2025) available here.
8 Dep't of the Treasury FinCEN, Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (May 9, 2019) available here; Dep't of the Treasury FinCEN, Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies (March 18, 2013) available here.
9 Press Release No. 25-010, Dep't of Justice, Global Cryptocurrency Exchange BitMEX Fined $100 Million For Violating Bank Secrecy Act (Jan 15, 2025) available here; Donald J. Trump, Executive Grant of Clemency (March 27, 2025) available here.
10 28 C.F.R. § 9.8(c) ("The amount of the pecuniary loss suffered by a victim for which remission may be granted is limited to the fair market value of the property of which the victim was deprived as of the date of the occurrence of the loss.").
11 See Stewart et al., Crypto 2.0: The New Administration recasts the landscape for Crypto, The National Law Journal (Feb. 21, 2025) available here.
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