Syed Rahman assesses the implications
The US justice department is to disband its unit that investigates cryptocurrency-related fraud.
In a sign of the current US administration’s belief in less crypto regulation, the deputy attorney general Todd Blanche issued a memo to justice department staff saying that the national cryptocurrency enforcement team (NCET) “shall be disbanded effective immediately”.
Blanche represented Donald Trump in last year’s criminal trial that saw the current president convicted of 34 charges of falsifying business records. In his memo, Blanche says that “the digital assets industry is critical to the nation’s economic development and innovation” and argues that the department of justice is not “a digital assets regulator”.
He adds that the justice department 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 department’s “investigations and prosecutions involving digital assets shall focus on prosecuting individuals who victimize digital asset investors, or those who use digital assets in furtherance of criminal offenses such as terrorism, narcotics and human trafficking, organized crime, hacking, and cartel and gang financing”.
The deputy attorney general has said that the decision to dissolve the NCET was part of the justice department’s efforts to comply with an executive order signed by President Trump in January. That order calls for the government to protect and promote “the ability of individual citizens and private-sector entities alike to access and use for lawful purposes open public blockchain networks without persecution”.
Current investigations that are “inconsistent” with the new policy “should be closed”, according to Blanche.
Easing
The NCET had been established under the previous US administration to address the challenge posed by the criminal misuse of cryptocurrencies and digital assets. It was staffed by attorneys with expertise in cryptocurrency, cybercrime and money laundering.
Its disbanding comes after President Trump talked of making the US the world’s crypto capital and of easing regulations on the digital asset sector and adopting pro-crypto policies. His election campaign last year saw him make great efforts to woo crypto companies and seek campaign fund contributions from them.
The one positive that crypto companies can take from this is that there is now far more regulatory certainty, which allows for investments to be made without fear. This may enable the US to become the preferred location for both start-ups and established businesses in the crypto industry – which is the task the Trump administration has set itself. Furthermore, the NCET had arguably been overworked. This change will enable the authorities to focus their work on a narrower field.
But the resulting negatives will be most strongly felt by consumers. The disbanding of the NCET is likely to lead to weakened deterrence, an increased fraud risk and a rise in sophisticated and complex scams. Consumers should be increasingly vigilant and careful.
