New DOJ Enforcement Policy for Digital Assets: Ending Cryptocurrency 'Regulation by Prosecution'

April 2025 marks a major shift in how the U.S. Department of Justice (DOJ) approaches cryptocurrency and digital assets. On April 7, 2025, the Deputy Attorney General Todd Branche, issued a policy memorandum titled “Ending Regulation By Prosecution,” outlining new enforcement priorities for digital assets (​justice.gov).

This DOJ memo is a significant development for fintech professionals, crypto startups, investors, and legal experts alike. It signals that while the DOJ will crack down on illicit financing activities of transnational bad actors and terrorists in the crypto space using all available tools (criminal charges, civil actions, and asset forfeitures), it won’t criminalize good-faith compliance efforts or act as a de facto digital assets regulator​. This policy shift marks a significant evolution in cryptocurrency regulation.

Ending “Regulation by Prosecution”: A New DOJ Approach

One of the memo’s core messages is that the DOJ “is not a digital assets regulator.” The Deputy Attorney General explicitly rejected the prior administration’s “reckless strategy of regulation by prosecution” in the crypto arena​. In plain terms, this means the DOJ will no longer use criminal prosecutions to impose regulatory requirements on the digital asset industry. Instead, actual regulators (like the SEC, CFTC, FinCEN, etc.) should set and enforce the rules, not DOJ prosecutors​. President Trump’s directive to 'end the regulatory weaponization against digital assets' underpins this shift, aiming to foster a more innovation-friendly climate.

Under the new policy, DOJ attorneys are instructed to “stop participating in regulation by prosecution.” For example, the memo says DOJ “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” – unless those cases also involve the high-priority crimes described below​.

DOJ’s Enforcement Priorities: Cracking Down on Bad Actors

So, what will the DOJ focus on? The memo makes it clear that DOJ’s top priority is going after bad actors who abuse digital assets to harm others or commit serious crimes. It spells out specific categories of misconduct that will get DOJ’s attention:

Fraud targeting crypto investors

Cases of embezzlement or misappropriation of customers’ funds on exchanges, digital asset investment scams, or fake crypto projects (“rug pulls”) are high-priority​. These are schemes where innocent investors are cheated, and the DOJ wants to hold the perpetrators accountable.

Cybercrime and hacks

The DOJ will pursue hacking of exchanges or decentralized autonomous organizations (DAOs) that result in theft of funds, as well as criminals exploiting vulnerabilities in smart contracts to steal digital assets​. Enforcement here helps restore stolen funds to victims and build confidence in the security of digital asset markets​.

Money laundering and illicit use by criminals

In line with a “total elimination” policy against major organized crime and terror groups (Executive Order 14157), the DOJ will target those using crypto to fund terrorism, narcotics trafficking, human trafficking, or other transnational organized crime​. For example, cartels and human traffickers have turned to crypto to launder illicit proceeds. Sanctioned entities like North Korea and terrorist organizations like ISIS use digital assets to evade detection​. The DOJ is intensifying its efforts on stopping illicit crypto finance tied to these serious threats.

Importantly, the memo emphasizes that the DOJ will pursue the individual wrongdoers themselves – not necessarily the neutral platforms they might misuse. As it states, the Department will go after the illicit actors and enterprises (even if they use digital asset platforms as tools), “but will not pursue actions against the platforms that these enterprises utilize to conduct their illegal activities.”​ In other words, if a drug cartel launders money through a particular exchange without the exchange’s knowing involvement, DOJ’s fight is with the cartel, not necessarily with the exchange. This distinction is meaningful for exchanges, mixers, wallet providers, and other service providers: DOJ doesn’t intend to blame them for criminals’ behavior, so long as the company itself isn’t knowingly complicit.

Further clarity on how the DOJ defines 'knowingly complicit' will be significant for future compliance.

The memo even directs that any ongoing DOJ investigations not aligned with these new priorities should be closed​. It also rescinds prior DOJ policies that conflicted with this approach​. This indicates a sweeping policy change – some cases launched under the previous enforcement philosophy might be dropped or rethought to fit the new focus. Having outlined these enforcement priorities, the memo also provides specific guidance for DOJ prosecutors.

New Charging Guidelines: Fewer Regulatory Offense Cases

Prosecutors are told to prioritize cases that involve clear fraud or criminal misuse of crypto, and to think twice before bringing charges solely for regulatory violations​.

The memo instructs prosecutors not to charge certain regulatory offenses in the crypto context, absent egregious circumstances. For example, prosecutors are discouraged from charging:

• Unlicensed money transmitting (operating a money service business without a license, under 18 U.S.C. § 1960) and Bank Secrecy Act violations in crypto businesses,
• Unregistered securities offerings or broker-dealer violations, and
• Other registration or licensing violations under statutes like the Securities Act of 1933, Securities Exchange Act of 1934, or Commodity Exchange Act,

unless there is evidence the person willfully broke the law, knowing they had a legal obligation and deliberately ignoring it​. In other words, if a crypto startup didn’t realize it needed a certain license or if it’s unclear whether a token is a security or commodity, the DOJ’s policy is to use prosecutorial discretion and not bring criminal charges for those technical violations in most cases. This is a discretionary policy (not a change in the law) meant to account for the regulatory uncertainty that has surrounded digital assets in recent years​. Footnote 2 of the memo makes clear that DOJ isn’t saying these laws don’t apply – just that they’ll usually reserve criminal prosecution for willful, knowing violators​.

Likewise, the DOJ does not want to drag itself (or the industry) into court debates over whether a digital asset is a “security” or a “commodity” if it can be avoided​. The memo directs that prosecutors should not charge violations of the securities or commodities laws where “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” (like fraud)​. The memo clarifies that prosecutors can still pursue cases involving digital assets in certain clear-cut scenarios. However, prosecutors are advised not to pursue cases that would require them to debate whether a specific crypto token itself qualifies as a security or commodity.

Any rare exception to these charging limits (for instance, a case that squarely raises whether a particular token is a security) requires high-level approval from DOJ leadership​. The guidance suggests considering factors like how widely accepted the asset’s classification is and whether there’s no alternative charge available​. The big picture for the industry is that DOJ is pulling back from policing the gray areas of crypto regulation through criminal court. Good-faith actors who are trying to comply with uncertain laws should not fear DOJ agents knocking on the door over, say, an unintentional licensing oversight.

If there is evidence of fraud, theft, or clear criminal intent, the DOJ will still pursue enforcement action and prosecution. If it’s an honest compliance mistake or an ambiguous classification issue, the DOJ would rather leave that to civil regulators than make it a criminal matter.

This policy shift provides clarity and reassurance to founders and developers who previously faced uncertainty and concern over potential criminal liability arising from ambiguous regulatory requirements. The DOJ appears to be indicating that criminal charges will generally be reserved for cases involving deliberate violations of law or fraudulent conduct, rather than inadvertent or technical regulatory missteps.

Asset Forfeiture & Victim Compensation: Using Tools to Increase Victim Compensation

Another notable aspect of the April 2025 memo is its focus on improving victim compensation in digital asset cases. This is where the DOJ’s use of forfeiture tools comes in.

Under current regulations, victims often can only reclaim the value of their assets at the time the fraud occurred or at the time of seizure – not accounting for any increase in the asset’s price afterward​.

To address this, the DOJ will enhance its forfeiture and restitution approach for digital assets. The Deputy AG directed the Office of Legal Policy and Office of Legislative Affairs to evaluate and propose changes – whether regulatory or legislative – to “improve asset-forfeiture efforts in the digital assets space.”​ This could mean pushing for new laws or rules so that victims can benefit from any appreciation in seized crypto value, or otherwise streamlining the process of returning funds to those who were harmed.

For investors and market participants, this is a positive sign that the DOJ will be actively trying to help make victims whole through the expanded use of forfeiture tools.

Shifting Resources and Disbanding the Crypto Enforcement Team

To support these new priorities, the DOJ is adjusting how it handles crypto enforcement internally. U.S. Attorneys' Offices nationwide will rely on established criminal justice tools. Crypto-related cases will no longer be handled by specialized task forces looking to develop novel legal theories. Instead, these matters will be integrated into existing DOJ units, such as fraud, money laundering, and cybercrime divisions. This restructuring reflects a more targeted approach to DOJ crypto enforcement, integrating crypto-related investigations into existing specialized divisions.

Shuttering NCET

Perhaps the most striking change is that the DOJ is shutting down its specialized cryptocurrency task force. The National Cryptocurrency Enforcement Team (NCET), a group that was formed in 2022 to focus on digital asset investigations, “shall be disbanded effective immediately.”​ Crypto cases will be folded into the broader mission of existing units. For instance, the memo notes that the Market Integrity and Major Frauds Unit will “cease cryptocurrency enforcement” activities so it can refocus on other priorities like immigration and procurement fraud​. This doesn’t mean DOJ is abandoning crypto enforcement – it’s signaling that the involvement of crypto per se is not going to lead to heightened suspicion. Cases will be pursued by the appropriate teams (fraud, cybercrime, etc.) based on the conduct, not just because “it involves crypto.”

That said, DOJ isn’t losing all its crypto expertise. The Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) will continue to provide guidance and training to DOJ personnel and serve as liaisons to the digital asset industry​. CCIPS is a longstanding unit experienced in cybercrime, so they’ll act as a knowledge hub to ensure prosecutors nationwide understand the technology and can engage with crypto businesses appropriately.

For crypto businesses and professionals, these internal shifts mean you might see fewer high-profile crypto-enforcement actions or novel legal theories coming out of DOJ. Instead, expect a more traditional law-enforcement approach: if someone commits fraud, they’ll be charged with fraud; if someone launders money, they’ll be charged under the all encompassing umbrella of money laundering. The end of the NCET also implies that the DOJ is moving away from viewing the entire industry with suspicion. This could foster a more open dialogue between law enforcement and the crypto sector, with CCIPS acting as a bridge.

Working Group on Digital Assets: Toward Regulatory Clarity

Enforcement isn’t the only angle here. The DOJ memo also highlights the Department’s role in broader government efforts to clarify digital asset regulation. The Justice Department will be an active participant in President Trump’s Working Group on Digital Asset Markets, established by Executive Order 14178​. Through this working group, DOJ attorneys (along with other agencies) will help identify and recommend new regulations, guidance, and legislative proposals relating to cryptocurrency and digital assets​.

The aim is to advance the policies set forth in the President’s Executive Order such as, fostering innovation and fair access while combating illicit use. The working group is tasked with preparing a report to the President with recommended regulatory and legislative changes for the digital asset sector​.

In response to the DOJ's new policy, Acting Chairman Caroline D. Pham of the Commodity Futures Trading Commission (CFTC) expressed strong support, directing CFTC staff to align with the DOJ's approach and the President's executive orders. Commissioner Pham lauded the move’s aims to end 'regulation by enforcement' in the digital asset industry, wanting to see the CFTC's resources focused on combating fraud and manipulation while fostering clear regulatory guidelines for innovators. Acting Chairman’s statement can be read here.

What This Means for Crypto Businesses, Developers, and Investors

The Department of Justice’s April 2025 policy shift represents a significant and positive development for the digital asset industry. This shift establishes clear enforcement priorities, distinctly emphasizing accountability for criminal conduct while safeguarding those entities making earnest, good-faith efforts to comply with existing regulations.

Entities operating crypto exchanges, wallet services, centralized platforms, and related businesses should review and strengthen their digital asset compliance frameworks. Robust Know-Your-Customer (KYC) and Anti-Money Laundering (AML) programs remain critical. By diligently implementing these controls, businesses can significantly mitigate their risk of inadvertent involvement in criminal activities and related regulatory scrutiny.

For developers and blockchain project teams, this DOJ enforcement policy provides greater clarity, potentially fostering innovation. The DOJ’s focus will remain on whether specific conduct involves fraud or facilitation of criminal activity. Launching a token project, for example, may not trigger DOJ criminal prosecution for unregistered securities offerings but could still invite civil actions from regulatory bodies such as the SEC.

Investors and users of digital assets stand to benefit from the DOJ’s sharpened focus on fraud prevention and restitution.

The DOJ’s enhanced asset forfeiture processes may enable victims of cryptocurrency fraud to recover a greater portion of their lost assets. Nevertheless, investors must continue exercising caution and performing thorough due diligence before engaging with new crypto opportunities.

For bad actors engaged in illicit activities, such as crypto-related fraud, hacking, the DOJ intends to fully utilize criminal statutes and civil asset forfeiture provisions to identify, prosecute, and financially penalize individuals involved in criminal enterprises. Whether these illicit activities involve schemes to defraud investors or operations intended to circumvent international sanctions, the DOJ has clearly indicated its readiness and determination to employ all available legal tools.

De Silva Law Offices has extensive experience guiding digital asset businesses, investors, and developers through complex regulatory matters and enforcement actions. For strategic counsel or compliance assistance tailored to your specific needs, please contact our legal team.

NB: This blog post is for informational purposes only and does not constitute legal advice.