Senate Democrats Criticize DOJ's Narrowing of Crypto Enforcement

Senate Democrats have expressed strong disapproval of the Department of Justice's (DOJ) recent decision to narrow its crypto enforcement priorities and disband its dedicated crypto enforcement team. The move, led by U.S. Deputy Attorney General Todd Blanche, has been criticized for potentially giving criminals a "free pass" in the digital asset sector.

In a letter addressed to Blanche, six Senate Democrats, including Sens. Mazie Hirono, Elizabeth Warren, Dick Durbin, Sheldon Whitehouse, Chris Coons, and Richard Blumenthal, argued that the decision to cut the National Cryptocurrency Enforcement Team (NCET) and refrain from pursuing cases against crypto exchanges, mixers, or offline wallets for the acts of their end users is "nonsensical." They warned that this directive could create a systemic vulnerability in the digital assets sector, making it easier for criminals to exploit the system.

The lawmakers highlighted that by not enforcing federal criminal law when violations involve digital assets, the DOJ is suggesting that virtual currency exchanges and other entities dealing in digital assets need not fulfill their anti-money laundering and countering the financing of terrorism obligations. This, they argued, would be detrimental to national security and public safety, as drug traffickers, terrorists, fraudsters, and adversaries could exploit this vulnerability on a large scale.

Blanche, in his memo to DOJ staff, cited U.S. President Donald Trump’s January executive order on crypto as the reason for his decision. He stated that the DOJ is not a digital assets regulator and will no longer pursue litigation or enforcement actions that superimpose regulatory frameworks on digital assets. Instead, the agency will focus on prosecuting criminals who victimize digital asset investors or use crypto in other criminal schemes.

However, the Senate Democrats disagreed with Blanche's reasoning, stating that allowing entities that enable these crimes to operate outside the federal regulatory framework without fear of prosecution will only result in more Americans being exploited. They urged Blanche to reconsider his decision to dismantle NCET, calling it a "critical resource for state and local law enforcement who often lack the technical knowledge and skill to investigate cryptocurrency-related crimes."

New York Attorney General Letitia James also raised similar concerns, urging lawmakers to pass federal legislation to regulate the crypto markets. Though her letter did not mention Blanche’s memo or the shuttering of NCET, a press release from her office highlighted the importance of a robust regulatory framework in light of the DOJ's decision.