U.S. Deputy Attorney General Todd Blanche is facing criticism from Senate Democrats over his recent move to restrict the Department of Justice’s (DOJ) focus on cryptocurrency enforcement and to dissolve its dedicated crypto enforcement team.
In a letter addressed to Blanche, six Democratic Senators—Mazie Hirono, Elizabeth Warren, Dick Durbin, Sheldon Whitehouse, Chris Coons, and Richard Blumenthal—condemned his decision to dismantle the National Cryptocurrency Enforcement Team (NCET), labeling it as providing a “free pass to cryptocurrency money launderers.”
The Senators expressed their disapproval of Blanche’s directive, which instructs DOJ personnel to refrain from pursuing legal action against crypto exchanges, mixers, or offline wallets for the actions of their users, or from filing charges for regulatory breaches related to cryptocurrency, including those tied to the Bank Secrecy Act (BSA). They described the directive as “absurd.”
“By relinquishing the DOJ’s responsibility to enforce federal criminal law concerning violations involving digital assets, you’re implying that virtual currency exchanges, mixers, and other entities dealing in digital assets do not need to meet their anti-money laundering and counter-terrorism financing duties, thus creating a systemic weakness in the digital assets space,” the Senators wrote. “Criminals, including drug traffickers and terrorists, will take advantage of this weakness on a large scale.”
In a memo to DOJ staff, Blanche pointed to a January executive order from then-President Trump regarding cryptocurrency, which aimed to establish a clearer regulatory framework for the industry, as justification for his actions.
“The DOJ is not a regulator of digital assets,” Blanche stated, noting that the agency would “cease pursuing litigation or enforcement actions that impose regulatory structures on digital assets while Trump’s appointed regulators handle that work outside the punitive framework of criminal justice.”
Blanche encouraged DOJ members to redirect their enforcement strategies towards prosecuting individuals who exploit digital asset investors or those who use cryptocurrencies for illegal activities such as organized crime and terrorism.
However, the Senate Democrats found Blanche’s assertions unconvincing.
“You assert in your memo that the DOJ will continue to prosecute those who use cryptocurrencies for criminal activities. Yet, allowing operators of entities like cryptocurrency kiosks to function outside of federal regulation without fear of prosecution will inevitably lead to the exploitation of more Americans,” they expressed.
The Senators implored Blanche to rethink his decision to dismantle the NCET, calling it an “essential resource for state and local law enforcement, which often lacks the expertise and skills needed to tackle crimes associated with cryptocurrency.”
Echoing similar concerns, New York Attorney General Letitia James penned a letter to Congress urging the passage of federal legislation to regulate the crypto sector. Although her correspondence did not specifically mention Blanche’s memo or the closure of the NCET, a press release from her office indicated that her request comes after the DOJ’s announcement regarding the shutdown of federal cryptocurrency fraud enforcement, underscoring the urgent need for a comprehensive regulatory framework.