In another of the many sweeping changes handed down by President Donald Trump currently dominating crypto news, the U.S. Department of Justice is abruptly shutting down the National Cryptocurrency Enforcement Team (NCET). This indicates a major shift in how the federal government will tackle crimes related to cryptocurrency going forward.
The move has taken many by surprise, and left speculators wondering how cryptocurrency fraud will be handled moving forward. There is a lot to unpack here, so let’s break it down piece by piece to gain a better understanding.
What Did the Crypto Scam Unit Handle?
NCET was a creation of the Department of Justice originally meant to tackle the overall misuse of cryptocurrencies and other digital assets relating to criminal activity. The overarching goal of the department was meant to investigate and prosecute criminal misuses, to trace and recover assets related to fraud, and to support law enforcement efforts.
Identified areas for increased focus. Under NCET, a focus was put on pinpointing the areas where more prosecutorial and investigative resources were needed. This included areas like ransomware schemes and money launderers.
Investigated and prosecuted criminal misuses of cryptocurrency. Through these actions, NCET would also handle cases including money laundering, virtual currency exchanges, and a litany of other illicit activities.
Built relationships with related partners. NCET also worked with other federal, state, local, and international law enforcement agencies, not to mention private sector partners and regulatory agencies.
Provided training and advice. Another thing NCET handled was the training and advisory of law enforcement agencies and federal prosecutors on developments with prosecutorial and investigative strategies.
Supported criminal investigations. In the event of criminal investigations, NCET would also support agencies and prosecutors by providing resources, expertise, and guidance.
Key Takeaways from the Disbanding of the NCET
There will be far-reaching impacts from the disbanding of NCET. It is a significant shift relating to the U.S.’ overall enforcement strategy. Let’s break down the biggest takeaways from this move.
Enhanced Focus on “Bad Actors”
The DOJ will take over the investigation and prosecution of conduct that victimizes investors. Things like scams, hacks, rug pulls, and the misappropriation of customer funds will still be pursued by the DOJ. Reining in those actions will not only provide a safer cryptocurrency landscape in the U.S. but also give the public the confidence needed to invest in digital asset markets.
It is being said that prosecutors will continue to aggressively pursue crypto cases as it pertains to transactional criminal organizations, cartels, and terrorist organizations. The regulatory landscape in the United States remains murky and it will be important for the DOJ to prevent a litany of new fraud cases from popping up.
Lessened Enforcement Against Crypto Companies
Perhaps the biggest takeaway from the disbandment of NCET is that the DOJ will no longer target mixing and tumbling services, virtual currency exchanges, and offline wallets based on unintentional regulatory breaches or user actions.
It has also been indicated that the DOJ will be taking a step back regarding the pursual of cases that involve Bank Secrecy Act violations, unlicensed money transmission, and registration failures unless it is clear that the defendants acted in a willful manner.
Victim-Protection Laws
A major part of the memo issued directs the Office of Legislative Affairs and the Office of Legal Policy to work toward a proposal of victim-protective legislation and regulations. This would allow investors to be able to recover the full present value of their crypto. Previously, it would only be the value as marked when the fraud occurred.
The disbandment of NCET is just the latest move under the new administration. Said administration has taken a seemingly more supportive stance when it comes to the digital asset sector as a whole. The change inches toward greater regulatory certainty for crypto businesses but shows the need for greater vigilance when it comes to bad actors and serious crimes.
A Shift from the Biden Era
NCET was initially established under former President Joe Biden in 2022. The group was given the task of addressing misuses within the cryptocurrency space. It was involved in a plethora of high-profile cases, including an investigation into Binance as well as its founder, Changpeng Zhao. Zhao pleaded guilty in 2023 to violations of U.S. anti-money laundering laws, creating a $4.3 billion settlement.
With the closing of NCET, prosecutors have been told to close any ongoing investigations that don’t align with current priorities. The DOJ has also since stated explicitly that it won’t pursue enforcement against mixing and tumbling services, crypto exchanges, or offline wallets for “unwitting violations of regulations.”
This marks a major departure from previous policy. Prosecutors are also being told not to charge violations of financial laws. This includes things like unregistered securities offerings or unlicensed money transmission. The exception comes only if it can be proved that the defendant in question not only knew of the rules but willingly broke them.
Trump’s Support of the Crypto Industry
The policy itself is an overall alignment with Trump’s executive order that advocates open access to more blockchain networks while also reflecting the administration’s overall support for walking back and easing regulations within the digital assets industry. It is important to note that he does hold a personal stake in the industry.
Both Trump and his family have made the foray into crypto projects within the last year. One of them is World Liberty Financial, a decentralized digital bank, that has not launched yet. That said, it has already sold more than $550 million in tokens. The venture currently sends 75% of its profits to entities that are linked to Trump. That’s not even mentioning profits made from meme coins branded for both Trump and his wife, Melania.
Market Integrity and Major Frauds Unit
The move isn’t limited to NCET. The Market Integrity and Major Frauds Unit has also been told to halt all cryptocurrency enforcement efforts. The Computer Crime and Intellectual Property Section of the criminal division will continue to work in a supporting role. It will do so by providing both training and guidance to personnel within the Justice Department while also acting as liaison to the digital asset industry.
The memo disbanding NCET was also critical of past efforts when it came to using criminal enforcement as a sort of de factor regulatory tool in the cryptocurrency industry under Biden. Now, the Justice Department will narrow that focus and go after individuals that use those digital assets to either facilitate or directly commit serious crimes.
An emphasis has been made by the Justice Department to continue investigating and prosecuting crimes related to digital assets when they are used to support human trafficking, cartel operations, to support terrorism, or cybercrime, or in the case of direct investor fraud.
“Litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets” won’t be pursued any longer, according to the memo. Responsibility to financial regulators operating outside of the criminal justice system will be deferred.
Despite the deregulatory shift, the overall digital asset market has seen a major plunge in the last month. Bitcoin, for instance, saw a drop from nearly $110,000 to $78,000, while the crypto market as a whole saw more than $1.2 trillion of its market cap disappear since December.
