DOJ Dissolves National Cryptocurrency Enforcement Unit, Shifts Focus to Criminal Activities

The U.S. Department of Justice (DOJ) has announced the dissolution of its National Cryptocurrency Enforcement Unit (NCET), marking a significant shift in the federal government's approach to digital asset regulation. This decision, outlined in a memo released by U.S. Deputy Attorney General Todd Blanche, comes in response to President Donald Trump's executive order issued in January. The order aims to establish "regulatory clarity" for digital assets, signaling a departure from the previous administration's strategy of using the Justice Department to impose regulatory frameworks through prosecution.

The NCET, established in 2021, was tasked with investigating and prosecuting crypto-related enterprises. It comprised prosecutors from the DOJ’s money laundering and cybercrime units, along with attorneys from various district offices. The unit played a pivotal role in several high-profile cases, including the investigation of Tornado Cash, a crypto mixer that uses cryptographic smart contracts and zero-knowledge proofs to obscure digital asset transaction trails.

Blanche's memo directs DOJ employees to refocus their crypto enforcement strategy. The new directive emphasizes prosecuting individuals who victimize digital asset investors or use digital assets to further criminal activities such as terrorism, narcotics trafficking, human trafficking, organized crime, hacking, and cartel and gang financing. This shift indicates a more targeted approach, focusing on criminal behavior rather than regulatory oversight.

The dissolution of the NCET aligns with President Trump's call to end the "regulatory weaponization" against digital assets. Blanche's memo underscores that the DOJ is not a digital assets regulator and that the previous administration's strategy of regulation by prosecution was ill-conceived and poorly executed. The memo further states that the DOJ will no longer pursue litigation or enforcement actions that superimpose regulatory frameworks on digital assets, leaving this work to actual regulators operating outside the punitive criminal justice framework.

This move by the DOJ reflects a broader policy shift towards promoting digital asset freedom and growth. By disbanding the NCET, the federal government aims to create an environment more conducive to the development and adoption of digital assets, while still addressing the criminal elements that exploit these technologies. The focus on prosecuting criminal activities rather than imposing regulatory frameworks suggests a more nuanced approach to digital asset governance, one that balances innovation with security.