DOJ Will Shutter Crypto Unit, Back Off Services Like Tornado Cash

In a massive shakeup for crypto regulation in the United States, the U.S. Department of Justice has disbanded its crypto-dedicated enforcement team and will no longer pursue criminal cases in several key crypto-related areas, according to an agency memo circulated Monday evening. 

The DOJ’s National Cryptocurrency Enforcement Team (NCET) has been disbanded effective immediately according to the memo, which was sent to agency staff last night by Deputy Attorney General Todd Blanche. 

Further, the DOJ will no longer pursue criminal charges against crypto exchanges, crypto mixing services, or holders of cold wallets for “acts of their end users or unwitting violations of regulations” unless those violations include crimes like embezzlement, scams, rug pulls, and hacks. 

A copy of the memo was posted to X Tuesday morning by Amanda Tuminelli, executive director of DeFi Education Fund, a crypto lobbying group. A source familiar with the matter confirmed its authenticity. The contents of the document were first reported by Fortune.

In a major shift of agency policy, the DOJ announced in the memo that in cases where a criminal enterprise or state enemy like North Korea uses a crypto service to launder funds, prosecutors will only pursue the enemy group itself, and “will not pursue actions against the platforms that these enterprises utilize to conduct their illegal activities.”

For years, crypto mixing services like Tornado Cash—which allow users to keep their crypto transactions private—have attracted government scrutiny, given they are popular not only among privacy advocates, but also with criminal groups looking to launder digital assets.

In 2023, the DOJ arrested and filed criminal money laundering charges against the site’s creator, Roman Storm, who has vigorously protested the case on the grounds that Tornado Cash is a permissionless service that does not intentionally aid criminal actors. 

Storm’s free speech defense was rejected by the case’s presiding judge in the fall, however, and the case is set to proceed to trial this summer. 

Now, that all could change. Last month, the U.S. Treasury Department lifted sanctions against Tornado Cash in compliance with a court order, and in last night’s DOJ memo, the Deputy Attorney General specifically stated that cases inconsistent with the agency’s new crypto policies should be dismissed. 

Decrypt reached out to the DOJ and to Roman Storm’s attorneys regarding any developments in the case, but did not immediately receive a reply. 

The DOJ says its hard pivot on crypto aligns with President Donald Trump’s executive order on the subject, which in late January ordered key federal agencies to protect and promote the ability of individual citizens and private entities to access public blockchains without fear of “persecution.”

“The prior Administration used the Justice Department to pursue a reckless strategy of regulation by prosecution, which was ill conceived and poorly executed,” Deputy Attorney General Blanche wrote to DOJ staff last night, in a reference to the policies of former president Joe Biden and his administration. 

Therefore, America’s top prosecutor will no longer pursue what it perceives to be “criminal matters premised on regulatory violations resulting from diffuse decisions made at lower levels of digital asset companies.”

Edited by James Rubin