On 07 April 2025, the United States Department of Justice (DOJ), through Deputy Attorney General Todd Blanche, issued a memorandum titled “Ending Regulation By Prosecution.” This policy document represents a recalibration of the federal government’s approach to digital asset enforcement, positioning the US DOJ squarely in alignment with Executive Order 14178 issued by President Donald J. Trump. The directive marks a formal departure from the prior administration’s prosecutorial strategy, where criminal enforcement was frequently employed to fill perceived regulatory gaps in the digital asset space, a practice now expressly denounced by the current administration as a misuse of criminal law.
The memorandum reflects a foundational shift in enforcement priorities, signalling the end of what the US DOJ now characterises as “regulation by prosecution”, a term referencing the aggressive use of criminal statutes to indirectly enforce regulatory compliance in lieu of clear legislative or agency rulemaking. Under the new policy, US DOJ prosecutors are directed to refocus investigative resources exclusively on conduct that (a) results in direct financial harm to investors or (b) involves the use of digital assets to facilitate traditional criminal activity, including terrorism, narcotics trafficking, organised crime, and human trafficking.
The memorandum makes plain that the DOJ, while possessing investigatory authority, is not a regulatory body for digital assets. It will no longer undertake enforcement actions that create de facto regulatory standards, such as treating unregistered offerings, licensing oversights, or technical violations of financial regulations as standalone criminal conduct, unless such conduct is accompanied by willful intent and falls within the core enforcement priorities.
The Policy establishes several core operational directives such as:
- Curtailment of Criminal Liability Based on Technical Regulatory Breaches: Prosecutors are instructed not to pursue charges under statutes such as the Bank Secrecy Act, unregistered securities offerings, or broker-dealer registration failures unless there is clear evidence of willfulness. Mere non-compliance with ambiguous or evolving digital asset regulatory standards will no longer suffice to trigger federal criminal prosecution.
- Avoidance of Doctrinal Litigation Over “Security” or “Commodity” Classifications: The DOJ is expressly dissuaded from initiating prosecutions that depend on judicial determinations as to whether a digital asset qualifies as a “security” under the Securities Act of 1933 or a “commodity” under the Commodity Exchange Act. Unless no adequate fraud-based alternative exists (e.g., wire fraud, money laundering), prosecutors should not test novel classification theories in criminal court.
- Termination of Ongoing Investigations and Units: Investigations inconsistent with this policy are to be closed. Effective immediately, the National Cryptocurrency Enforcement Team (NCET) is disbanded, and the Market Integrity and Major Frauds Unit will no longer handle cryptocurrency cases. Instead, general prosecutions consistent with the new framework may continue through local U.S. Attorneys’ Offices.
- Prosecutorial Focus on Illicit Finance: The DOJ will concentrate its efforts on digital asset misuse in contexts such as:
- Cartel and terrorist financing, including the use of digital assets by organisations such as Hamas, ISIS, and North Korean actors;
- Fentanyl trafficking, where cryptocurrency is increasingly used to fund precursor chemical procurement and laundering networks;
- Digital asset investment fraud, such as misappropriation on exchanges, rug pulls, and theft through hacking or smart contract exploits.
- Asset Recovery and Compensation Reforms: Noting shortcomings in current forfeiture procedures, the memo tasks the DOJ’s Office of Legal Policy and Office of Legislative Affairs with proposing regulatory and legislative amendments to allow victim compensation based on present asset value, rather than depressed valuations at the time of the fraud. This would directly address fairness issues highlighted in high-profile bankruptcies (e.g., FTX, Voyager, Celsius) where victims were denied post-fraud market appreciation.
- Interagency Collaboration via the President’s Working Group: The DOJ will now actively participate in the President’s Working Group on Digital Asset Markets, established under Executive Order 14178. The group is tasked with recommending statutory and regulatory reforms to reduce legal uncertainty, eliminate enforcement duplication, and modernise the digital asset regulatory framework. The DOJ will assist in drafting a consolidated report for the President, the recommendations of which will become binding DOJ policy upon adoption.
This policy memorandum is an attempt to re-establish clear jurisdictional boundaries among federal agencies by explicitly rejecting criminal enforcement as a substitute for regulation, the US DOJ under Blanche acknowledges the legal and economic risks of prosecutorial overreach in a rapidly evolving technological domain. The memorandum seeks to de-risk digital asset innovation by clarifying that lawful businesses, including exchanges, custodial platforms, wallet services, and software developers, will not face criminal liability for technical or passive regulatory infractions, provided they are not willfully complicit in fraud or crime. This may encourage greater capital formation, legal structuring, and domestic growth in the blockchain and Web3 sectors. The disbanding of NCET and resource reallocation toward traditional DOJ priorities (e.g., immigration and procurement frauds) signals a fundamental reprioritisation of federal enforcement efforts. This reallocation may free up DOJ bandwidth for high-impact national security and public safety cases, while reserving digital asset engagement for matters with a clear nexus to economic or criminal victimisation.
The new US DOJ crypto enforcement policy provides a clear legal environment for exchanges, custodians, DeFi protocols, and blockchain developers and lays the groundwork for a unified, Congressional-led digital asset regulatory framework that removes duplicative state and federal requirements and appropriately distinguishes between asset types (utility tokens, payment coins, NFTs, stablecoins, etc.).
