In a sweeping shake-up that’s reverberating through the digital asset world, the U.S. Department of Justice has officially disbanded its National Cryptocurrency Enforcement Team, shifting focus away from prosecuting crypto platforms and toward individual bad actors exploiting the technology for fraud and crime.

In a bold Monday memo, Deputy Attorney General Todd Blanche told DOJ staffers the department would no longer act as a “shadow regulator” for cryptocurrency. The move aligns with President Donald Trump’s executive order urging federal agencies to foster innovation rather than impede it — and effectively ends what critics had dubbed "regulation by prosecution."

DOJ Rewrites Its Crypto Playbook

“The Justice Department is not a digital assets regulator,” the memo stressed. With that declaration, the DOJ is halting enforcement efforts against crypto platforms — including exchanges, mixers, and wallets — unless they are directly complicit in illegal conduct. Instead, prosecutors are now being urged to zero in on scams, hacks, and misappropriation of customer funds.

“We’re going after the wolves, not the wool,” the memo implied, invoking a metaphor that suggests platforms — even flawed ones — aren’t the root predators in the crypto ecosystem.

The now-defunct National Cryptocurrency Enforcement Team (NCET), formed just two years ago to handle major crypto crimes, has been dismantled effective immediately. Similarly, the Market Integrity and Major Frauds Unit is withdrawing from crypto enforcement to reprioritize other economic crimes.

Making Crypto Safer, Not Smaller

Blanche’s directive doesn’t mean a free-for-all in crypto. The department will continue targeting malicious uses of digital assets, especially where investors are defrauded or crypto is used to fuel broader criminal enterprises — from drug cartels to terrorist networks.

The priority cases going forward include:

• Rug pulls (where developers abandon projects and abscond with funds),

• Hacks and cyber intrusions,

• Ponzi-like crypto schemes, and

• Crypto used in organized crime or terrorism.

But in a striking twist, prosecutors are told to avoid charging violations tied solely to crypto regulation, such as unlicensed money transmission or BSA violations, unless clear, willful misconduct is present.

DOJ Eyes Legislative Fixes for Fairer Recoveries

The DOJ isn’t just chasing criminals — it's pushing for policy changes to make crypto crime victims whole.

In a section of the memo aimed at justice beyond punishment, Blanche directed the Office of Legal Policy and Office of Legislative Affairs to explore regulatory reforms ensuring that defrauded investors recover the full value of their crypto holdings, including gains lost to crime or bankruptcy delays.

“No more settling for the value of your Bitcoin when it was stolen,” the memo essentially promises. “Victims deserve today’s price — not yesterday’s pain.”

Avoiding Costly Battles Over Securities Classifications

In an effort to sidestep murky regulatory waters, prosecutors have been advised not to charge violations that would force the DOJ to litigate whether a crypto asset is a security or a commodity, unless absolutely necessary.

Still, the memo notes prosecutors may treat Bitcoin and Ether as commodities, and can still pursue securities fraud charges when digital assets clearly function as equity or stock in crypto firms.

This signals a DOJ keen to streamline cases and maximize impact without getting bogged down in jurisdictional brawls with agencies like the SEC or CFTC.

DOJ Silent on Impact to Ongoing Suits

The department declined to elaborate on how this new policy impacts active litigation, including its ongoing high-profile case against Roman Storm, accused operator of crypto mixer Tornado Cash — a platform at the heart of the debate over privacy vs. crime in the crypto space.

A Pivot With Industry-Wide Implications

This is more than a memo — it’s a paradigm shift. By shutting down the NCET and stepping back from platform prosecutions, the DOJ is redefining its role in a rapidly evolving digital landscape.

The department will also continue contributing to federal working groups on digital asset policy, offering recommendations for regulatory clarity and consumer protection under the umbrella of the Trump administration’s pro-innovation directive.

In a digital wild west that’s seen more than its fair share of sheriffs, bounty hunters, and snake oil salesmen, the DOJ has just redrawn the map — and everyone from developers to investors is watching where the trail leads next.