U.S. Sen. Mazie Hirono and five Democratic colleagues are calling on U.S. deputy attorney general Todd Blanche to reverse recent decisions that have effectively done away with the Department of Justice’s investigation and prosecution of cryptocurrency-related crimes.
On Monday, DOJ ordered the disbanding the National Cryptocurrency Enforcement Team, which focused on cryptocurrency crimes, as part of the broader initiative to no longer pursue crypto cases that involve banking and securities law.
The Associated Press quoted a memo from Blanche to DOJ prosecutors in which Blanche stated, “The Department of Justice is not a digital assets regulator.”
In the memo, Blanche also criticized the Biden administration for using DOJ to “pursue a reckless strategy of regulation by prosecution,” AP reported.
The DOJ’s moves mean it will no longer enforce federal laws that apply to entities that handle so-called mixing and tumbling services. Such services — sometimes used by drug traffickers, child pornographers or even rogue nations like North Korea — involve mixing identifiable cryptocurrency with others to make it harder to trace.
In a letter to Blanche, the senators equated the DOJ’s actions to giving “a free pass to cryptocurrency money launderers.”
“Nearly a quarter of the funds sent to mixers in 2022 were tied to money laundering efforts,” they wrote. “Mixers are a favorite tool of North Korea — which uses them to launder the illicit proceeds of its state-sponsored cybercrime and then uses the proceeds to fund its weapons programs — and of sanctioned Russian oligarchs, who already benefit from DOJ disbanding Task Force KleptoCapture. Mixers are also a favorite tool of drug traffickers and those who trade child sexual abuse material. It makes no sense for DOJ to announce a hands-off approach to tools that are being used to support such terrible crimes.”
The lawmakers accused DOJ of abdicating its responsibility to enforce federal criminal law when digital assets are involved, thereby signaling that “virtual currency exchanges, mixers, and other entities dealing in digital assets need not fulfill their (Anti-Money Laundering/Countering the Financing of Terrorism) obligations, creating a systemic vulnerability in the digital assets sector.”
“Drug traffickers, terrorists, fraudsters, and adversaries will exploit this vulnerability on a large scale,” they wrote.
The senators further suggested that the real reason the department was giving up on investigating and prosecuting cryptocurrency crimes was President Donald Trump’s supposed interest in selling his cryptocurrency assets.
According to Blanche’s memo, DOJ will instead prioritize investigations that “involve conduct victimizing investors.” It states that it will also prioritize cases “involving use of digital assets in furtherance of unlawful conduct by cartels, Transnational Criminal Organizations, Foreign Terrorist Organizations and Specially Designated Global Terrorists.”
The memo states that ongoing investigations that do not fit within the parameters stated in the EO will be discontinued.
In their letter, the senators asked Blanche to reconsider his decisions and requested a staff-level briefing no later than May 1 that would provide detailed information on the rationale behind the decisions and their anticipated impacts on the DOJ's ability to enforce the law and protect Americans from cryptocurrency-based crimes.
Joining Hirono in the letter were Sens. Elizabeth Warren, D-Mass.; Dick Durbin, D-Ill.; Sheldon Whitehouse, D-R.I.; Chris Coons, D-Del.; and Richard Blumenthal, D-Conn.
Michael Tsai covers local and state politics for Spectrum News Hawaii. He can be reached at michael.tsai@charter.com.
