In a sweeping change to its approach toward the regulation of digital assets, the U.S. Department of Justice has disbanded its National Cryptocurrency Enforcement Team (NCET). The decision—announced in a memo by Deputy Attorney General Todd Blanche—signals a significant departure from the enforcement strategies pursued during the previous administration and aligns with President Donald Trump’s pro-crypto agenda.

A New Enforcement Paradigm

According to the memo, the DOJ will no longer target routine regulatory violations in the digital asset space. Instead, federal prosecutors are instructed to focus on investigating and prosecuting criminals who intentionally use cryptocurrency to facilitate serious crimes such as terrorism financing, drug trafficking, human trafficking, and organized crime. As Deputy Attorney General Blanche stated in the directive, “The Department of Justice is not a digital assets regulator.” This language underscores a desire to narrow enforcement to clear cases of fraud or criminal misuse rather than penalizing the mere operation of crypto platforms.

The NCET, which was established in 2022 under the previous administration to combat alleged fraud and illicit financial activity in digital assets, played a leading role in high-profile investigations. Notably, cases against major players like Binance and the operators of cryptocurrency mixers were driven by the team’s broad enforcement mandate. However, critics of the previous approach argued that such measures amounted to “regulation by prosecution”—a practice they claimed stifled innovation by targeting technologies and platforms rather than focusing solely on bad actors.

Why the Shift?

The policy change is rooted in several intertwined factors:

• Political Promises and Industry Backing:
  President Trump, who has turned from an initial crypto skeptic to an outspoken advocate, has repeatedly voiced his support for digital asset businesses. Throughout his campaign—and now during his second term—Trump has positioned the United States as a global hub for cryptocurrency innovation. His administration has actively rolled back regulatory actions initiated under former President Biden, citing that prior enforcement practices unfairly targeted innocent market participants.
• Criticism of “Regulation by Prosecution”:
  The memo criticizes earlier efforts by the DOJ for “pursuing a reckless strategy of regulation by prosecution,” suggesting that the previous policies imposed de facto regulatory frameworks through criminal enforcement. By narrowing its focus, the department aims to direct its limited resources toward prosecuting clear cases of fraud and criminal activity, rather than casting a wide net that might deter technological innovation.
• Broader Deregulatory Efforts:
  This move is part of a larger deregulatory trend under Trump. Similar shifts have been observed at financial regulators such as the Securities and Exchange Commission, which has recently paused or dropped several high-profile enforcement actions against crypto and digital asset companies.

Impact on the Crypto Market

The realignment of enforcement priorities is likely to have several direct and indirect effects on the crypto market:

• Enhanced Industry Confidence:
  With the DOJ stepping back from targeting exchanges, mixers, and other crypto platforms for “unwitting” regulatory breaches, industry insiders believe that companies can innovate with reduced fear of punitive actions. Peter Van Valkenburgh, executive director of the advocacy group Coin Center, remarked on social media, “We should be going after bad guys. Not the developers of good tools that bad guys happen to use.” This sentiment is echoed by several market participants who expect a boost in investor confidence and increased liquidity, at least in the short term.
• Potential for Increased Innovation:
  Without the looming threat of aggressive enforcement for technical or inadvertent compliance violations, startups and established platforms may channel more resources into research and development. Lower regulatory pressures could foster a more dynamic market where novel financial products and services have a freer path to market entry.
• Concerns Over Consumer Protection:
  Despite the positive sentiment from parts of the industry, some critics worry that a rollback in enforcement could leave consumers more vulnerable to fraud and scams. With the DOJ’s focus shifting only to cases of explicit intentional wrongdoing, weaker actors might exploit the regulatory gap, potentially leading to a surge in fraudulent activities if complementary oversight by other agencies does not fill the void.

Divergent Expert Opinions

The move has sparked a range of opinions among policy analysts and legal experts:

• Supportive Views:
  Many crypto advocates and industry leaders welcome the decision, viewing it as a long-overdue correction that will allow U.S. firms to compete on a more equal footing globally. Supporters argue that by eliminating “regulation by prosecution,” the DOJ is halting what they perceive as an overreach that previously deterred innovation and limited the industry’s growth.
• Cautious Concerns:
  Conversely, some legal experts urge caution. They warn that while targeting only intentional wrongdoing is a step in the right direction, it could also reduce the deterrent effect against lax compliance by crypto service providers. In the absence of robust oversight, there is a risk that fraud and financial misconduct might become more commonplace—a situation that could ultimately harm investors and destabilize the market.
• Regulatory Gaps and the Role of Other Agencies:
  Analysts also note that the DOJ’s new approach does not close the door on enforcement entirely. Other regulatory bodies like the SEC and the Commodity Futures Trading Commission (CFTC) may still pursue cases where consumer protection and market integrity are at stake. The long-term impact will likely depend on how well these agencies coordinate their oversight with the DOJ’s revised priorities.

Looking Ahead

The decision to dismantle the NCET is effective immediately, and ongoing investigations that do not align with the new policy are being reassessed. While the Trump administration’s policy shift aims to stimulate innovation and reduce burdens on digital asset businesses, its success in balancing deregulation with consumer protection remains to be seen.

For now, market reaction appears mixed. Initial responses from crypto businesses have been upbeat, citing the move as a victory for the industry. However, with complexities remaining in the broader regulatory landscape, experts agree that the long-term effects on market stability and consumer safety will require close monitoring.

As the DOJ refocuses its efforts on overt criminal misconduct in the digital asset space, stakeholders on all sides of the debate will be watching closely to determine whether this policy realignment will ultimately lead to a more vibrant and secure crypto market—or if it might inadvertently pave the way for new challenges.