On April 7, 2025, Deputy Attorney General Todd Blanche issued a memorandum to all Department of Justice employees (the “Memorandum”) announcing an overhaul of previous enforcement directives relating to digital assets. The Deputy Attorney General issued the Memorandum consistent with Executive Order 14178(the “Digital Asset Executive Order”).

The Memorandum asserts that the last administration “used the Justice Department to pursue a reckless strategy of regulation by prosecution.” It also states that DOJ “will no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets while President Trump’s actual regulators do this work outside the punitive criminal justice framework.”

The Memorandum announces a number of changes and revised enforcement priorities, including:

• Prioritizing Willful Misconduct That Harms Victims. Prosecutors now must prioritize cases that “cause financial harm to digital assets investors and consumers,” or that involve the use of digital assets to carry out other criminal conduct, like “fentanyl trafficking, terrorism, cartels, organized crime, and human trafficking and smuggling.”
  • Notably, DOJ will not pursue actions “against the platforms that these enterprises utilize to conduct their illegal activities” merely because the platforms were used by the bad actors.
  • The Memorandum also notes that “criminal matters premised on regulatory violations resulting from diffuse decisions made at lower levels of digital asset companies often fail to advance the priorities of the Department.”
• Limiting Technical Registration Prosecutions. Prosecutors may not pursue charges for failure to comply with digital asset-related licensing or registration requirements “unless there is evidence that the defendant knew of the relevant requirement and violated it willfully.”
  • The registration requirements affected by this policy include those applicable to money service businesses under the Bank Secrecy Act and various securities/commodities and broker-dealer registration statutes and regulations.
  • Notably, the Acting Chairman of the Commodity Futures Trading Commission (“CFTC”), Caroline Pham, lauded the Memorandum and, likewise, directed the Division of Enforcement not pursue regulatory violations in cases involving digital assets—including in particular violations of registration requirements under the Commodity Exchange Act—unless there is evidence that the defendant knew of the licensing or registration requirement at issue and willfully violated the requirement.
• Avoiding Regulation by Prosecution. Prosecutors may not pursue charges that would require litigation over a digital asset’s status as a security or commodity, and instead should pursue alternative charges, such as mail or wire fraud.
  • Exceptions to this policy must be approved by the Attorney General or her designee(s).
• Increasing Victim Compensation. The Office of Legal Policy and the Office of Legislative Affairs should propose solutions to address asset-forfeiture recovery constraints that have limited victim recoveries to the value of their digital assets at the time a fraud was perpetrated, and thus have prevented victims from achieving full recoveries.
• Shifting Enforcement Resources. The Memorandum disbands the National Cryptocurrency Enforcement Team (NCET) and redirects the Market Integrity and Major Frauds Unit from cryptocurrency enforcement to other pressing priorities, such as immigration and procurement fraud.
• Engaging with the President’s Working Group. The Memorandum commits DOJ officials to actively participate in the President’s Working Group on Digital Asset Markets, evaluate existing regulations (including by recommending changes), and contribute to a forthcoming report that could reshape federal oversight of digital assets.

The memorandum represents a significant change in the Justice Department’s approach to digital asset enforcement and regulation, signaling a clear shift away from the more expansive and broad-based enforcement efforts of the prior administration—an approach the Memorandum criticizes as “regulation-by-prosecution.” Notably, the Memorandum indicates that the DOJ will not pursue enforcement actions against “platforms” that are “utilized” by illicit actors, potentially suggesting fewer criminal investigations of crypto exchanges and digital asset platforms. Instead, the Department appears poised to refocus enforcement efforts against individuals who knowingly provide financial support for narcotics traffickers, transnational criminal organizations, and terrorist groups.

In our view, these developments are likely to ease investigative and enforcement burdens on certain participants in the digital asset space. At the same time, given the focus on illicit finance in the Memorandum and in the Administration more broadly, market participants should take the opportunity to review their control and compliance frameworks to ensure risks in this area are appropriately addressed.

This post comes to us from Sullivan & Cromwell LLP. It is based on the firm’s memorandum, “DOJ Limits Crypto Prosecutions and Disbands Prosecution Unit,” dated April 9, 2025, and available here.