The Tax Times: DOJ’s New Shift in Crypto Enforcement: Willfulness Takes Center Stage

Introduction

The U.S. Department of Justice (DOJ) is making a clear pivot in its approach to enforcing digital asset regulations, focusing less on technical violations and more on prosecuting those who willfully enable criminal activity through cryptocurrency platforms. This change, set in motion by Deputy Attorney General Todd Blanche’s April 2025 memorandum—which expressly discourages “regulation by prosecution”—is reshaping the landscape for cryptocurrency companies and their executives. The days when simply failing to register as a money transmitter could land you in federal court may be fading, but the government’s scrutiny of willful misconduct—especially regarding sanctions evasion and serious crime—has never been sharper.

Old Rules, New Approach

For years, the DOJ has used 18 U.S.C. § 1960—which criminalizes operating an unlicensed money transmitting business—to go after cryptocurrency firms. Violations fell into three buckets: (1) operating without a state license, (2) failing to register with FinCEN, or (3) knowingly transmitting funds linked to criminal activity. Early cases, like the 2007 E-Gold prosecution, relied on these statutes, and digital asset companies have long viewed them as a regulatory tripwire.

Blanche’s April 2025 memo shifted the DOJ’s enforcement posture. It directed prosecutors not to use criminal charges simply to enforce regulatory requirements, especially when digital asset oversight is actively being addressed by non-punitive regulatory agencies. The memo is clear: no more criminal charges for failing to register as a money transmitter without proof the defendants knew about the registration requirement and chose to ignore it. Prosecutors are now to focus on “prosecuting individuals who victimize digital asset investors, or those who use digital assets in furtherance of criminal offenses such as terrorism, narcotics and human trafficking, organized crime, hacking, and cartel and gang financing.”

How This Is Playing Out in Real Cases

Several pending criminal cases illustrate the memo’s impact. In U.S. v. Scanlon, a U.S. Attorney’s office dismissed an indictment charging failure to register with FinCEN, though no reasons were given—suggesting internal recalibration in line with the memo. In U.S. v. Storm—the case against Tornado Cash’s developers—the prosecution dropped the charge for failing to register but pressed ahead on allegations that the developers knowingly ran a platform used for money laundering, sanctions evasion, and crime. Similarly, in U.S. v. Rodriguez & Hill—charging Samourai Wallet founders—prosecutors dropped the registration charge and doubled down on the allegation that the executives knew their service was used for large-scale money laundering and sanctions evasion. In both cases, the DOJ emphasized that their actions followed the Blanche memo’s directive to focus on intent and willfulness.

A Pattern Emerges

These cases show that the DOJ is not abandoning criminal enforcement in digital assets but is narrowing its focus. Prosecutors are dropping charges based solely on regulatory technicalities, but aggressively pursuing cases where there’s evidence defendants knew their platforms were being used to launder money or violate sanctions. Sanctions evasion, especially involving actors like North Korea’s Lazarus Group or Russian oligarchs, is a recurring theme, reflecting the U.S. government’s broader policy priorities.

Key Takeaways for Crypto Companies

Although the Blanche memo has led to the dismissal of some charges, it does not signal a hands-off approach from Washington. Here’s what this means for digital asset companies:

· Intent is Critical: The DOJ will prosecute when it can prove willful misconduct—not just innocent oversight or noncompliance.

· Sanctions Evasion Is a Priority: Engaging with sanctioned entities remains a top DOJ target. Crypto platforms must know their customers and implement robust monitoring.

· Compliance Programs Matter: While civil regulators (FinCEN, state agencies) can still penalize companies for unregistered activity, a good compliance program can reduce regulatory friction and, crucially, make it harder for prosecutors to allege willful misconduct.

· Old Offenses, New Standards: The DOJ’s enforcement strategy is evolving, not evaporating. Companies should consult legal counsel and carefully review their compliance posture in light of these developments.

Conclusion

The DOJ’s new policy is a shift, not a retreat. Cryptocurrency companies should breathe a cautious sigh of relief if they’ve never intended to break the law, but—especially if their platforms touch sanctioned entities or are used for money laundering—they remain squarely in the DOJ’s sights. The message is clear: the government is moving away from prosecuting technical noncompliance, but if it can show you knew what you were doing was illegal, expect the full force of federal prosecution. Now is the time to review your compliance programs, train your teams, and make sure you’re not just checking boxes, but actively preventing misuse of your platform. The stakes have changed, but the risks for the unwary or willfully blind remain high.

Have an IRS Tax Problem?