Earlier this month, the Department of Justice disbanded its National Cryptocurrency Enforcement Team and said it would no longer pursue what Deputy Attorney General Todd Blanche described as “regulation by prosecution.”

You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.

The narrative

The U.S. Department of Justice “will no longer pursue litigation or enforcement actions that have the effect of superimposing regulatory frameworks on digital assets” in lieu of regulatory agencies putting together their own frameworks for overseeing the sector, a 4-page memo signed by Deputy Attorney General Todd Blanche on April 7 said. In other words, the DOJ will no longer pursue “regulation by prosecution,” the memo said.

Why it matters

The DOJ’s memo raised concerns that it may mean criminal activities in the crypto sector would not be prosecuted, or at least prosecuted as heavily as it was under the past several years — both by disbanding the National Cryptocurrency Enforcement Team (NCET) and by shifting the entity’s priorities.

Breaking it down

At a practical level, the memo itself is internal guidance but may not be a binding document. Multiple attorneys told CoinDesk they interpreted the guidance to indicate that the DOJ would still bring fraud or other criminal cases involving crypto, but would try to avoid any cases where the DOJ itself had to determine if a digital asset was a security or a commodity.

“Fraud is still fraud,” said Josh Naftalis, a partner at Pallas Partners LLP and a former prosecutor with the U.S. Attorney’s office for the Southern District of New York. “This memo does not seem to say the DOJ is not going to prosecute fraud in the crypto space.”

Still, the memo raised alarms for prominent Democrats who questioned whether the DOJ was suggesting it would let criminal conduct occur. Senators Elizabeth Warren, Mazie Hirono, Richard Durbin, Sheldon Whitehouse, Christopher Coons and Richard Blumenthal wrote a letter to Blanche, saying his “decision to give a free pass to cryptocurrency money launderers” and shut down the NCET were “grave mistakes that will support sanctions evasion, drug trafficking, scams and child sexual exploitation.”

“Specifically, the Department will no longer target virtual currency exchanges, mixing and tumbling services and offline wallets for the acts of their end users or unwitting violations of regulations — except to the extent the investigation is consistent with the priorities articulated in the following paragraphs,” the DOJ memo said, a passage the Senators’ letter referenced.

New York Attorney General Letitia James wrote an open letter to Senate leaders in the same week asking them to advance legislation to address cryptocurrency risks. She did not specifically reference Blanche’s memo but detailed possible ways to better police the sector through legislation.

Katherine Reilly, a partner at Pryor Cashman and a former prosecutor with the U.S. Attorney’s Office for the Southern District of New York, told CoinDesk that most of the major crypto cases brought by the DOJ in recent years would not have been affected had this guidance been in effect.

The BitMEX case in 2020, when the DOJ and Commodity Futures Trading Commission brought unregistered trading and other charges against the platform, is “probably closest to the line” of being a case that may not have been brought under this guidance, she said.

Trump pardoned BitMEX, its founders and a senior employee in late March, barely two weeks before the DOJ memo was shared.

“I think that it’s clear that the Justice Department wants to limit the DOJ’s role in regulating the crypto industry … looking beyond its role in other crimes, fraud, laundering proceeds from narcotics trafficking, things like that, and sort of take a step back from the role of trying to bring order and fairness to the crypto industry as a whole,” Reilly said.

That’s “probably the intent behind the BitMEX pardons too,” she said.

Naftalis said the DOJ will continue to pursue drug, terrorism or other illicit financing charges even under the memo.

“I think that the headline for the industry is to the extent that there are legal uses of crypto, they’re not going to set the guard rail by criminal enforcement,” he said. “That’s for Congress.”

One section of the memo tells prosecutors not to charge Bank Secrecy Act violations, unregistered securities offering violations, unregistered broker-dealer violations or other Commodity Exchange Act registration violations “unless there is evidence that the defendant knew of the licensing or registration requirement at issue and violated such a requirement willfully.”

Carla Reyes, an Associate Professor of Law at SMU Dedman School of Law, told CoinDesk that this may be referencing recent cases where developers build tools under the impression that they were not committing unlicensed money transmitting activities under existing guidance but may get charged anyway.

“Most criminal statutes require some level of knowledge to define your intention, and knowledge that you’re committing a crime when you do it,” she said. “The further away you get from that, the lesser the charge, but the more willful [and] intentional it is, the higher the charge.”

What the memo seems to want to explicitly move away from is any suggestion that federal prosecutors would interpret how securities or commodities laws might apply to digital assets.

“Prosecutors should not charge violations of the Securities Act of 1933, the Securities Exchange Act of 1934, the Commodity Exchange Act, or the regulations promulgated pursuant to these Acts, in cases where (a) the charge would require the Justice Department to litigate whether a digital asset is a ‘security’ or ‘commodity,’ and (b) there is an adequate alternative criminal charge available, such as mail or wire fraud,” the memo said.

A popular critique leveled against former SEC Chair Gary Gensler by the crypto industry was that he was “regulating by enforcement,” rather than focusing on developing guidance for the industry to know what was or wasn’t acceptable. Blanche seems to be referring to a similar critique in the memo, Naftalis said, in that one-off enforcement decisions by the SEC or DOJ should not define the guardrails for the industry.

Steve Segal, a shareholder at Buchalter, said that some of the DOJ’s past cases would charge trading venues for failing to police their own customers. The memo now seems to suggest that if a crypto exchange’s executives were running a clean platform, and customers were laundering funds derived from criminal activities, the executives would not be charged. This is in contrast with, for example, FTX, where the executives were charged and convicted of (or pled guilty to) fraud charges.

“Of course, a lot of the big crypto cases we’ve seen over the last few years are sort of pure investor fraud, things like FTX. And one of the more interesting things about this memo is it talks about crypto investors and really prioritizing cases where crypto investors are being victimized,” Reilly said. “And so I don’t think we should conclude that this memo means we’re going to see a lot fewer cases in the crypto space, or that crypto companies can sort of breathe a sigh of relief that the DOJ is out of the picture for a few years.”

The DOJ’s future cases may appear a bit different in terms of the specific allegations made, but “it’s much too soon to say that everybody can assume the DOJ is out of the crypto business,” she said.

Many of the attorneys speaking to CoinDesk agreed that the memo itself did not clarify all of the different issues that may come up with a criminal case, nor was it an end-all/be-all document.

The memo announced prosecutorial discretion but it isn’t itself a law, Reyes said, adding that it may guide internal decision-making about which cases to pursue the most heavily, as well as the strategies that guide those prosecutions.

A lot of details about how this memo ties together with Trump’s executive order on the strategic bitcoin reserve still need to be spelled out, Segal said. Sections on victim compensation and how seized funds should be handled in the memo do not explain how the DOJ might handle situations where seized funds are turned over to bankruptcy estates, such as what happened with FTX or other similar scenarios.

“I think we’ll really have to see how it plays out, because this guidance, I do think, leaves prosecutors a lot of room to bring cases even of these kinds of violations that are being cast as more regulatory,” Reilly said. “So even if that’s the intent, I think the devil is in the details on what cases we see going forward.”

Monday

• The Securities and Exchange Commission and Binance were set to file a joint status report on their discussions after a judge paused the regulator’s case against the exchange and its affiliated entities and executives in February. Last Friday, the parties asked for an extension of this deadline, and the judge overseeing the case signed off on Monday, giving the parties until mid-June to file a follow-up.

• (The Wall Street Journal) Binance executives met with U.S. Treasury Department officials in March about potentially “loosening U.S. government oversight” of the exchange following Binance’s November 2023 guilty plea, the Journal reported. Binance agreed to a court-appointed monitor as part of the plea. At the same time as last month’s discussions, Binance was in talks with the Trump-backed World Liberty Financial to develop a dollar-pegged stablecoin.
• (Fortune) Fortune spoke to and profiled Bo Hines, the executive director of U.S. President Donald Trump’s digital assets advisory council.
• (CNBC) U.S. importers are seeing more “canceled sailings” due to a drop in demand as a result of tariffs, CNBC reports.
• (The Verge) ICERAID claims to be a protocol on Solana where people can crowdsource images of “criminal illegal alien activity” in exchange for tokens, but it does not appear to have any connection to Immigration and Customs Enforcement (ICE), The Verge reports.
• (NPR) The Department of Homeland Security is revoking parole for a number of migrants, telling them to self-deport from the U.S. U.S. citizens, born within the U.S., are also receiving these emails.
• (The New York Times) Acting IRS Commissioner Gary Shapley has been replaced after just three days on the job, after Treasury Secretary Scott Bessent reportedly complained to President Donald Trump that he was not consulted on Shapley’s promotion, which was pushed by Elon Musk.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Bluesky @nikhileshde.bsky.social.

You can also join the group conversation on Telegram.

See ya’ll next week!

Crypto’s moment has seemingly arrived in Washington, D.C., and the industry is trying to make the most of it. But as new organizations hatch and leadership shifts at the top advocacy operations, the field of pro-crypto groups trying to carry the torch is more crowded than ever.

No fewer than a dozen groups — including the Digital Chamber, Blockchain Association and Crypto Council for Innovation — are seeking to steer digital assets policies in the U.S., some of them substantially overlapping in their membership bases, funding sources and in the goals they’re seeking to accomplish.

Most of the leaders of those groups told CoinDesk they have a more-the-merrier view on pushing for friendly policy from President Donald Trump’s highly receptive administration and from Congress, which is increasingly loaded with industry allies.

“Many of the objectives are consistent across these groups,” said Miller Whitehouse-Levine, who recently left the DeFi Education Fund to launch the new Solana Policy Institute. “That’s a good thing, because I think there’s an absolute torrent of legislative and regulatory work that’s going on right now, and we need all the help we could get.”

Congress is chasing several crypto bills, including legislation to set boundaries for crypto markets, oversee stablecoin issuers, curtail digital assets in illicit financing, call for proof of reserves at crypto firms and set up government digital reserves. “We would have 100 more groups and 10,000 more people working on these issues in an ideal world,” Whitehouse-Levine added.

But other current and former policy advocates privately grant that the field is getting packed and that it can be difficult to justify so many entities pulling for the same cause with the same finite universe of congressional staff, White House offices and regulatory officials. In the recent past, groups have talked about reorganization and consolidation, according to people familiar with the discussions, though such efforts haven’t been executed.

Meanwhile, new organizations have hung their shingles in recent weeks, including Whitehouse-Levine’s SPI and the National Cryptocurrency Association, further increasing the ranks. That’s often how the numbers have grown in Washington: A company or lobbyist who feels some specific interest isn’t properly represented and can figure out how to pay for it. And big crypto firms have also set up their own D.C. operations, pushing for their more highly tailored interests.

New leaders

Cody Carbone is still just days into his leadership of the Digital Chamber — the oldest and largest crypto membership group. The Chamber and virtually every other major digital assets organization has lost or swapped leaders in the opening months of this year — many of them in the past few weeks.

He said he understands why so many are suddenly keen on showing up in Washington to take advantage of the turn in crypto sentiment, and he sees this crowded field of U.S. groups as a net positive when there is so much work to go around getting complex legislation done.

“At some point, there could be too many cooks in the kitchen,” he said. “But I think that’s a problem for a later day.”

Sheila Warren, who recently stepped away as the chief of CCI, said “there’s definitely room for differentiation” in crypto’s growing army of boosters, but she said a united front — in whatever form — is key.

“I think it’s really about coming together and recognizing that we all pretty much want the same things,” she said.

Not all of the groups share the same agendas. Some focus on narrow areas of the industry, and a few are more oriented toward research or serving crypto users rather than companies. Their ranks include Coin Center, Satoshi Action Fund, Bitcoin Policy Institute, Government Blockchain Association and Bitcoin Mining Council. Ripple started the new NCA with an astounding $50 million commitment, and it’s meant to be one of those more interested in the people who use and invest in crypto than the industry players.

Politics

On the raw, political edge of advocacy, the industry — especially U.S. exchange Coinbase — has entered the arena. Coinbase set up Stand With Crypto in an effort to jump-start a grass-roots-style crypto movement. That message-of-the-people strategy was bolstered by the extremely well-funded political action committee Fairshake and the dark-money influence arm, Cedar Innovation Foundation.

Fairshake spent more than a hundred million dollars to put friendly lawmakers into congressional seats last year, and the industry is already seeing big, bipartisan support in the early days of the new session. One point of evidence: The Democrats came out in force to join Republicans in killing an Internal Revenue Service rule that could have made existence-threatening demands on decentralized finance (DeFi) projects.

“I think it’s a huge benefit that we have so many organizations dedicated to trying to achieve regulatory clarity for digital assets,” said Amanda Tuminelli, who stepped up to run the DeFi Education Fund when Whitehouse-Levine left. “I think it’s been really needed, especially in the past few years, and when we work together, we actually accomplish great outcomes. For example, the IRS broker rule on DeFi.”

As it tackles those major questions on tax, government crypto reserves, the structure of the markets and regulations of stablecoins, the crypto lobbying space is leaping into a new chapter. That transition is made even more stark with the sudden and dramatic shuffle of leadership.

Kristin Smith, who was the chief of one of the leading groups, left the Blockchain Association to go work for former underling Whitehouse-Levine as president of his new Solana organization. So the association is left shopping for a new CEO. Meanwhile, the founder and longtime leader of the Digital Chamber, Perianne Boring, exited that job for unpaid work leading the board, and the founder of crypto think tank Coin Center similarly departed.

In Warren’s absence at CCI, Ji Kim — the group’s former general counsel and head of global policy — told CoinDesk he remains “laser-focused on ensuring that CCI continues to be the leading, substantive and global voice for our members on key policy issues.” When asked about the potential of organization mergers, he said he had “nothing to say” on that point.

The lobbyists and advocates have routinely come together on letters, events and papers pushing their common aims.

Carbone said there’s “definitely friendliness and conversations between us,” though he said there “needs to be more collaboration.”

However, the groups have practical needs for funding and members, and they’re driven to secure members who can sometimes only afford to join one or two of them.

“There’s obviously a competitiveness angle to this as well,” Carbone acknowledged. “It would be naive to say there’s not, so there’s a race sometimes.”

Tariffs, tariffs, tariffs.

Trump’s on-again, off-again import levies dominated the week. At the beginning, tariffs sent stocks and crypto appreciably lower. By the end, with all new non-China tariffs paused for 90 days, markets were up again.

Bitcoin returned to a level ($82,000) that it was at this time last week. And analysts debated whether, in the panic of the previous days, it showed “safe haven” qualities (like gold) or whether it was a risk-asset like many others. The consensus was that bitcoin performed resiliently rather than completely reassuringly.

Our Asia reporting team led the way on our markets coverage. Omkar Godbole started the week strong by revealing how the unwinding of the “basis trade” could impact bitcoin price. Sam Reynolds wrote on how Kalshi was set to win its legal battle in Nevada, hours before the prediction market got its first victory in the state. Shaurya Malwa reported on the first XRP ETF listing in the U.S. and how Teucrium’s leveraged fund received $5m during its first day of trading.

From our European team, there was some timely analysis from James Van Straten, and the All-Important U.S. 10-Year Yield Moving in the Wrong Direction for Trump, and a story showing the resilience of the decentralized economy from Oliver Knight, How DeFi ‘Defied’ Market Carnage as Traders Poured Millions Amid Panic. Our coverage expanded beyond just tariffs and market reactions, with Jamie Crawley’s scoop, Rootstock Prepares to Release SDKs for Bitcoin Layer 2s Using BitVMX after he took the opportunity offered by an embargoed press release to phone the company and interview the founder. And there was a nice DeFi follow-up on the repercussions of HyperLiquid’s price manipulation exploit from March by Oliver, How the Hype for HyperLiquid’s Vault Evaporated on Concerns Over Centralization.

Meanwhile, there was lots of news that wasn’t tariff-related.

Paul Atkins was confirmed as the new SEC chair. The Department of Justice closed down its crypto enforcement unit, prompting criticism, from Democrats and others, that it’s not serious about combating malfeasance. The SEC approved ETH ETF options, following a long delay. And President Trump put an end to a controversial DeFi accounting rule.

It was a week that showed how crypto was increasingly central to finance and even macro-economics. Fun times are ahead.