Sidley Discusses Shift of DOJ Focus in Digital Asset Enforcement
The U.S. Department of Justice (DOJ) has announced a significant shift in enforcement priorities concerning digital assets. On April 7, 2025, Deputy Attorney General Todd Blanche issued a memorandum announcing that the Department is not a "digital assets regulator" and will no longer pursue litigation or enforcement actions that "have the effect of superimposing regulatory frameworks on digital assets." Instead, the Memorandum directs DOJ to focus on the prosecution of conduct that victimizes investors or uses digital assets in furtherance of crimes such as terrorism, narcotics trafficking, hacking, and human trafficking.
This new directive could result in halting several ongoing investigations and cases. However, stakeholders in the digital asset industry should expect that prosecutors will still use all tools available to target priority offenses. Accordingly, stakeholders will be well served by continuing to implement effective compliance programs and anti-money laundering controls.
Enforcement Priorities: Focus on Victimization of Crypto Investors
DJOJ leadership has directed its prosecutors to deprioritize cases against virtual currency exchanges, mixing and tumbling services, and offline wallets for the acts of their end users or for "unwitting" violations of regulations. Instead, DOJ prosecutors are instructed to focus on cases against individual actors that victimize investors, including:
- Embezzlement of funds on exchanges
- Digital asset scams
- Rug pulls
- Hacking
- Exploitation of smart contract vulnerabilities
This shift is also consistent with the change in priorities at the SEC, which has stepped away from pending litigation against several digital asset protocols and exchanges and announced the formation of a Crypto Task Force. The DOJ will also prioritize the prosecution of cases involving the use of digital assets in furtherance of unlawful conduct by cartels, Transnational Criminal Organizations, Foreign Terrorist Organizations, and Specially Designated Global Terrorists, such as narcotics trafficking and human smuggling.
Significant Changes to Charging Considerations
The Memorandum outlines certain factors that prosecutors should consider when making charging decisions. Factors favoring prosecution include cases involving individuals who (1) cause financial harm to digital asset investors and consumers and (2) used digital assets in furtherance of cartel or other criminal activities. Conversely, prosecutors are directed to refrain from charging regulatory violations in cases involving digital assets, including but not limited to:
- Violations of the CEA
- Market manipulation cases
The Memorandum also directs prosecutors to avoid charging violations of the CEA, except in cases where Bitcoin and Ether are the "commodities" in question. This could lead to a significant change in prosecutorial appetite for cases against exchanges and other facilitating entities.
Considerations for Digital Asset Companies and Exchanges
Notwithstanding the shift in enforcement priorities, blockchain companies and digital asset exchanges should not lower their defenses on the assumption that DOJ will prosecute only individuals to the exclusion of corporations. Stakeholders in the digital asset space should continue to consider undertaking relevant risk assessments and compliance improvements on a periodic basis to prevent harm to crypto investors, market participants, and their bottom lines.
State Attorneys General have been increasingly active in investigating market manipulation cases, so stakeholders should remain vigilant and proactive in ensuring compliance with regulatory requirements.
Conclusion
The DOJ's shift in focus on digital asset enforcement is a significant development that will impact the industry. While the Memorandum may lead to a decrease in prosecutorial appetite for certain types of cases, it is essential for stakeholders to continue implementing effective compliance programs and anti-money laundering controls. By doing so, they can minimize their exposure to regulatory risks and ensure the long-term sustainability of their operations.