Trump‘s presidency brought a change into how cryptocurrency is treated; he said federal prosecutors should go easier on enforcement and shut down a unit at the Justice Department. His policies have been more in favor of cryptocurrencies, and this shift marks a big change from the previous administration, as described in a memo obtained by ABC News.
A New Direction: “Regulation by Prosecution” Reversed
Prosecutors have been told to alter their charging policies in regard to virtual currency. They are no longer to charge them for ‘mixing’ and ‘tumbling’ services, which may not necessarily be in compliance with regulations set forth. Prosecutors now focus on those who commit actual crimes against investors and those who use crypto as a means to perpetrate crimes.
In his memo, Blanche criticizes the previous administration for what he labels a ‘reckless strategy,’ pointing fingers at ‘regulation by prosecution.’ He states, ‘The Department of Justice is not a digital assets regulator,’ demonstrating that he wants the Department of Justice to step back from dealing with cryptocurrency affairs.
Disbanding the NCET: A Gestural Action
One of the more striking changes announced recently is the complete disbanding of the National Cryptocurrency Enforcement Team (NCET). This unit, which was formed under the last government, had a mandate of prosecuting and investigating crypto-related offenses. Its elimination marks a shift in focus within the Justice Department and signifies a less aggressive operational posture on crypto enforcement.
Focus on Individual Criminals: A More Limited Approach
Per the new guidance, prosecutions and investigations in the cryptocurrency realm will focus on “those who victimize digital asset investors or those who use digital assets in furtherance of illegal activities such as terrorism, narcotics and human trafficking, organized crime, hacking, cartel and gang financing.” This limited scope indicates an attempt to move deeper into specific criminal actions, rather than dealing with more comprehensive industry practices.
Implications of Earlier Offenses: Adjusting the Strategy
As noted in the memo, the Justice Department may be rubberbanding their approach, seeking prosecution on cases stemming from past administrations. For example, the prosecution of Tornado Cash for allegedly laundering over $1 billion and the hacking conviction of Avraham Eisenberg for a $110 million market manipulation scheme were both prosecuted by the U.S. Attorney’s Office for the Southern District of New York.
Defense of Bankman-Fried’s Prosecution: A Different Lens
It seems Blanche’s memo has a degree of scrutiny regarding the direction set toward prosecuting FTX’s former CEO Sam Bankman-Fried for allegedly committing “one of the biggest financial frauds in American history.” Blanche claims that victimized investors in this case have only recouped the value of their digital assets at the time of the fraud, meaning they would have limited profit owing to their unrealized gains. He recommends other strategies to determine victim loss.
Trump’s Pro-Crypto Stance: A Consistent Policy
This change in enforcement resonates with President Trump’s overarching pro-crypto strategies, which involve instructing the SEC and CFTC to soften crypto regulatory policies and the establishment of a digital assets reserve.
A Wait-and-See Approach: Industry Reaction
This crypto development is bound to be met with careful optimism. Even if the enforcement relaxation fosters a more attractive, innovative atmosphere within the industry, there are still looming concerns regarding potential threats as well as some degree of regulation. There is uncertainty concerning the outcome of this policy revision.
