DOJ Disbands Cryptocurrency Enforcement Team, Shifts Focus

The US Attorney General has announced a major change in how federal regulators approach cryptocurrency markets. A recent memorandum directed the U.S. Department of Justice (DOJ) to scale back litigation and enforcement actions against digital asset platforms. Instead, the DOJ will focus on individuals and organizations using digital assets in unlawful ways. A recent memo from Sidley summarizes the changes:

“Continuing the Trump Administration’s shift away from targeting digital asset platforms, software, and other facilitating spaces, DOJ leadership has directed its prosecutors to deprioritize cases against virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their end users or for ‘unwitting’ violations of regulations. Instead, DOJ prosecutors are instructed to focus on cases against individual actors that victimize investors, including: (1) embezzlement of funds on exchanges; (2) digital asset scams; (3) rug pulls; (4) hacking; and (5) exploitation of smart contract vulnerabilities”

The DOJ’s National Cryptocurrency Enforcement Team is now disbanded, as part of the DOJ’s new approach. Additionally, the memorandum reaches beyond the DOJ and is being implemented by other federal agencies. The Commodity Futures Trading Commission (CFTC) has announced its intentions to adhere to the memorandum. The spotlight is shifting from digital asset platforms, but the DOJ will still litigate against platforms directly engaging in unlawful activity. This comes as the administration makes efforts to expand the use and adoption of cryptocurrencies into traditional banking systems. It is unclear how this might affect the broader cryptocurrency ecosystem, but it does bring several pending enforcement actions against crypto platforms to an end.