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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.”