U.S. Department of Justice Disbands Its Crypto Enforcement Team

The U.S. Department of Justice (DOJ) disbanded its National Cryptocurrency Enforcement Team (NCET) on April 7, 2025, as confirmed by multiple sources. Deputy Attorney General Todd Blanche issued a memo stating the DOJ will no longer pursue cases against crypto exchanges, mixers, or offline wallets for their users’ actions or unintentional regulatory violations. The focus is shifting to prosecuting individuals who directly harm crypto investors or use digital assets for crimes like terrorism, drug trafficking, or fraud.

This aligns with the current administration’s push to reduce regulatory pressure on the crypto industry and foster innovation, though critics warn it could weaken oversight of illicit activities. Ongoing investigations inconsistent with this policy are to be closed, but specific case details weren’t disclosed.

Reduced regulatory pressure may encourage blockchain startups and developers to experiment with new applications, as the fear of unintentional regulatory violations diminishes. This could accelerate advancements in decentralized finance (DeFi), smart contracts, and tokenized assets. Exchanges and wallets facing fewer legal hurdles may expand services, improving user access to blockchain-based platforms. This could drive mainstream adoption of cryptocurrencies and decentralized applications (dApps).

While the move signals a lighter touch, the lack of clear guidelines might create confusion for blockchain projects navigating compliance. Some developers may hesitate without a defined legal framework. Critics argue that scaling back enforcement could enable bad actors to exploit blockchain’s pseudonymity for illicit activities, potentially tarnishing the technology’s reputation and slowing institutional trust.

The U.S. signaling a pro-crypto stance may attract blockchain talent and investment, positioning it as a hub for innovation. However, jurisdictions with stricter regulations might lose ground or push back with tighter controls. The overall effect hinges on how the DOJ balances this leniency with targeted enforcement against clear criminal activity. Blockchain’s growth could surge, but unchecked risks might invite future crackdowns.

DeFi protocols, often built on permissionless blockchains, have faced scrutiny for operating outside traditional financial regulations. With the DOJ scaling back enforcement against platforms for unintentional violations, developers may feel emboldened to create new protocols, such as advanced lending platforms, decentralized exchanges (DEXs), or synthetic asset systems, without fear of immediate legal repercussions. Reduced regulatory pressure could lead to more experimentation with novel DeFi primitives like flash loans, automated market makers (AMMs), or cross-chain bridges. Developers might push boundaries in yield farming or liquidity mining without worrying about accidental non-compliance with U.S. laws.

The U.S. becoming a more DeFi-friendly jurisdiction could draw global developers, fostering innovation hubs for blockchain-based financial tools. This might lead to breakthroughs in scalability or user experience, addressing current DeFi pain points like high gas fees or complex interfaces. Crypto wallets and exchanges are critical gateways to DeFi. With fewer legal risks, these platforms may expand services, integrate more DeFi protocols, and offer user-friendly interfaces, lowering barriers for non-technical users. For example, wallets like MetaMask could deepen integrations with DEXs like Uniswap or lending platforms like Aave. A lighter regulatory touch could encourage traditional financial institutions to explore DeFi.

DeFi’s borderless nature means U.S. policy shifts ripple globally. Relaxed enforcement could spur adoption in regions where users rely on U.S.-based exchanges or wallets to access DeFi, amplifying transaction volumes on chains like Ethereum, Solana, or Binance Smart Chain. While the DOJ’s move reduces immediate enforcement, it doesn’t clarify DeFi’s legal status under securities, banking, or anti-money laundering (AML) laws. Protocols still face uncertainty about compliance with agencies like the SEC or CFTC, which could deter some developers from fully capitalizing on the leniency.

DeFi operates globally, but other jurisdictions (e.g., EU with MiCA) may tighten regulations in response to perceived U.S. laxity. This could complicate cross-border operations for DeFi protocols, forcing them to navigate a patchwork of rules. The DOJ’s current stance reflects the administration’s pro-crypto leanings, but political shifts could reverse this. DeFi projects scaling rapidly now might face abrupt regulatory crackdowns later, especially if high-profile incidents expose vulnerabilities.

DeFi’s pseudonymity and lack of centralized control make it attractive for money laundering or fraud. The DOJ’s focus on individual bad actors rather than platforms could embolden malicious users, as protocols like mixers (e.g., Tornado Cash forks) face less scrutiny. This might lead to more hacks, rug pulls, or Ponzi-like schemes disguised as DeFi projects. High-profile DeFi exploits could erode public trust, especially if regulators later blame lax oversight. For instance, a major protocol hack like the $600M Poly Network exploit in 2021 could prompt renewed DOJ or SEC intervention, undermining DeFi’s growth.

With less platform accountability, unsophisticated users might fall prey to scams or poorly audited protocols. DeFi’s permissionless nature means anyone can launch a token or liquidity pool, and reduced enforcement might amplify predatory behavior. Relaxed policies could attract more capital to DeFi, increasing total value locked (TVL) in protocols. For context, DeFi’s TVL was around $90 billion in early 2025; a regulatory green light could push this higher as investors and institutions participate.

A DeFi boom might drive demand for governance tokens (e.g., UNI, COMP, AAVE), inflating prices short-term. However, unchecked growth could lead to bubbles, with corrections if projects fail to deliver sustainable value. Stablecoins like USDT and USDC are DeFi’s backbone. If exchanges and wallets face fewer restrictions, stablecoin adoption could grow, but any future DOJ pivot targeting issuers (e.g., Tether) could disrupt DeFi liquidity.

Blockchains hosting DeFi (e.g., Ethereum, Polygon, Arbitrum) could see increased activity as developers deploy new protocols. Layer 2 solutions might gain traction for scaling DeFi transactions, addressing cost and speed issues. With less fear of U.S. enforcement, protocols enabling cross-chain interoperability e.g., Chainlink, Polkadot could thrive, creating more interconnected DeFi ecosystems. If the DOJ maintains this stance, the U.S. could outpace stricter jurisdictions like the EU or China in DeFi innovation. However, global competitors might counter with clearer regulations to attract compliant projects.