QUESTION
Our compliance department notified us that the government has stopped criminal, regulatory, anti-money laundering enforcement of the crypto sector. We are a bank that accepts cryptocurrency transactions. For instance, we accept cryptoassets such as Bitcoin.
One of my tasks is to monitor the cryptocurrency exchange platforms. I want to know the extent to which it is necessary to monitor these platforms if there is not going to be any enforcement. Are we wasting our time? I realize that government officials want to deregulate crypto, but it seems a stretch to allow the exchange platforms to bear no accountability. I hope you can shed some light on this subject.
If there is not going to be enforcement of regulations involving cryptocurrency, to what extent is it necessary to monitor exchange platforms?
SOLUTION
- AML TESTING
- AML TRAINING
- AML RISK ASSESSMENT
- AML PROGRAM [Written Policy]
RESPONSE
On April 7, 2025, Todd Blanche, the Deputy Attorney General in the DOJ, issued a memorandum containing the following statement:
''The Department of Justice is not a digital assets regulator.''[i]
The memorandum was issued a couple of weeks after President Donald Trump pardoned several cryptocurrency executives and a company that had pleaded guilty to anti-money laundering compliance violations.[ii]
The Justice Department has decided to stop pursuing those cases altogether. That means, in substance, that the DOJ will no longer pursue litigation or enforcement actions that effectively superimpose regulatory frameworks on the digital assets sector.
In other words, there is a focus on deregulating the cryptocurrency industry. The Justice Department will no longer target virtual currency exchanges, "mixing and tumbling" services, and offline wallets for the acts of their end users and unwitting violations of regulations.
Furthermore, the memorandum makes clear that prosecutors are directed not to charge regulatory violations in cases involving digital assets, including unlicensed money transmitting, violations of the Bank Secrecy Act, unregistered securities offering violations, and other registration requirements under the Commodity Exchange Act. When there are cases involving digital assets, prosecutors are now directed to pursue illicit financing by the culpable individuals and enterprises themselves – but not against the platforms they use to conduct the illegal activity.
DISBANDED OVERSIGHT
Mr. Blanche also disbanded the Justice Department's National Cryptocurrency Enforcement Team, effective immediately, and directed the Market Integrity and Major Frauds Unit to cease cryptocurrency enforcement and instead focus on other priorities, such as immigration and procurement frauds.
You mention that your task is to monitor the cryptocurrency exchange platforms. It appears the DOJ has changed its focus away from regulating the platforms themselves, seemingly interested in only the illicit transactions of bad actors who use the platforms. To me, this seems like going after bad drivers while doing nothing to put stop signs on the road itself to protect pedestrians.
Cryptoasset exchange platforms are subject to certain regulatory oversight, but the level and nature of that oversight vary depending on the specific jurisdiction and the nature of the cryptoassets being traded. In the US, platforms that trade cryptoassets that are securities are subject to registration and regulation as national securities exchanges. Additionally, platforms may need to register as Money Services Businesses (MSBs) with the Financial Crimes Enforcement Network (FinCEN). The Commodity Futures Trading Commission (CFTC) also regulates crypto derivatives. A regulatory referral about an cryptocurrency exchange platform to the DOJ may now not be prosecuted with respect to illicit activity conducted by the platform itself.
