The DOJ shifts digital assets prosecution priorities

policy & regulation

4.14.25

In other news from Washington, the Department of Justice issued a memorandum on ending “the regulatory weaponization against digital assets.” Setting out the Department’s new priorities, the Deputy Attorney General writes, “The Justice Department will no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets while President Trump’s actual regulators do this work outside the punitive criminal justice framework. … [T]he Department’s investigations and prosecutions involving digital assets shall focus on prosecuting individuals who victimize digital asset investors, or those who use digital assets in furtherance of criminal offenses such as terrorism, narcotics and human trafficking, organized crime, hacking, and cartel and gang financing.”

For broader context, it’s not out of the ordinary for leadership to shift prosecution and resource priorities at the change of administrations. But, it is rare to disband a whole unit, as this memo does, ending the National Cryptocurrency Enforcement Team (NCET) and requiring a unit within the DOJ’s Fraud Section to cease crypto enforcement entirely. Many of the novel crypto prosecutions and investigations, however, were brought by U.S. Attorney’s offices, which the memo tasks with leading going forward, with assistance from the HQ-based Computer Crime and Intellectual Property Section. To be clear, DOJ guidance sets department-wide policy and priorities; it does not change the law.

What the DOJ’s memo does accomplish is to require more careful consideration and provide less discretion when investigating and charging cases involving regulatory violations in the digital asset space, stating quite clearly, “The Department of Justice is not a digital assets regulator.”

What are the key takeaways?

Prosecutors should take action involving illicit financing against the individuals and enterprises engaged in the activity themselves and not pursue actions against the platforms used.
The memo specifically restricts prosecutions for regulatory violations, including the registration prongs of 18 U.S.C. § 1960 (unlicensed money transmission), Bank Secrecy Act violations, unregistered securities offering and broker-dealer violations, and Commodity Exchange Act registration failures.
Such regulatory offenses should only be charged where there is evidence of a knowing and willful violation, acknowledging the regulatory uncertainty present during the prior administration.
Prosecutors should also not charge SEC 33 or 34 Act violations that require the DOJ to litigate whether a digital asset is a security or a commodity and where there are adequate other criminal statutes available to use, such as mail or wire fraud.
The DOJ’s Offices of Legal Policy and Legislative Affairs have been directed to evaluate and propose statutory and regulatory changes to improve recovery and forfeiture efforts for digital asset investor victims.

But the DOJ has retained some powerful tools in its arsenal to assist in combating priority cases involving cartels, terrorists, and sanctioned nation states such as North Korea and Iran. To this end, the memo has specifically carved out an exception for charging the so-called “third prong” of §1960, sometimes referred to as “money laundering lite.” This third prong prohibits an individual from knowingly conducting, controlling, managing, supervising, directing, or owning all or part of an unlicensed money transmitting business that involves the transportation or transmission of funds that are known to the charged person to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity. Because this subsection has a lower knowledge, or “scienter,” requirement than a money laundering charge, it could still expose individuals and blockchain businesses to liability when cartels, terrorists, or sanctioned funds are involved. And given recent actions against developers, there is still uncertainty about who is classified as a money transmitter under this statute.

What’s on the road ahead?

Whether this memo will force dismissal of any pending prosecutions is unclear. Some who are under investigation, but not yet charged with regulatory-type offenses, may see those investigations paused or closed. Regardless, legislation to amend §1960 is still needed. In addition, updated FinCEN guidance and statutory changes to Title 31 clarifying that non-custodial software providers are not money transmitters would give blockchain developers needed certainty that their projects do not subject them to potential criminal (or regulatory) liability.

Nothing in this memo insulates developers or companies from criminal (or civil) liability for sanctions violations or for laundering funds. Indeed, given the administration’s priorities of aggressively pursuing violations involving fentanyl trafficking, Hamas terrorist financing, and North Korean hacks, the industry should continue to mitigate illicit finance risks where possible. But, the Department’s statement that it 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” should give all some breathing room to build.

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