Furthermore, the Department of Justice (DOJ) has announced the dissolution of their National Cryptocurrency Enforcement Team (NCET). Created in October 2021, this unit is intended to spearhead difficult criminal investigations and prosecutions involving the criminal misuse of cryptocurrency. In July 2023, the team was accepted into the Computer Crime and Intellectual Property Section (CCIPS) of the DOJ’s Criminal Division. This merger cemented the Criminal Division’s expertise in the fight against cybercrime.

NCET was established primarily to address crimes involving virtual currency ATM-style exchanges. It further focuses on blending and tumbling services, noting the latter’s role in money laundering infrastructure provision. It focused on understanding and prosecuting scam artists who preyed on digital asset investors. This included ongoing advisement and training for Department staff, as well as acting as liaisons to the burgeoning digital asset industry.

NCET's Formation and Objectives

To help combat the growing sophistication and prevalence of these cryptocurrency-related crimes, the Department of Justice established the National Cryptocurrency Enforcement Team (NCET). The specialty team’s mission was to identify, investigate and prosecute cryptocurrency exchanges that help launder money for various criminal enterprises. The inquiry specifically focused on those who defrauded investors in digital assets. The intention here was to focus on delivering meaningful direction and training to Department staff.

She was appointed the team’s first director in February 2022. She was eventually succeeded by Claudia Quiroz, formerly a NCET deputy director, who is now the CCIPS deputy chief.

NCET was formed of about 30 anti-fraud specialists and attorneys from a dozen SEC regional offices. These experts used their fintech and cyber crime backgrounds, along with their SEC expertise to identify, prevent, and punish wrongdoing associated with securities trades in target jurisdictions.

Merger and Rationale

Under this plan, NCET will fold in to CCIPS, leaving one consolidated office. This comprehensive approach is an important extension of the Criminal Division’s expertise to combat cybercrime in all forms. The merger’s impetus was implementing more efficient operations. It will enhance the DOJ’s capacity to address a wide range of digital crimes, from cryptocurrency-linked crimes to intellectual property theft.

The need for a change corresponding to the decision to disband NCET was announced to all DoJ employees in a September 22 memo from deputy attorney-general Todd Blanche. Our recent transition-related memo underscored how the prior administration pursued a dangerous playbook. They turned to regulation by enforcement, which was badly thought out and carried out.

“The Department of Justice is not a digital assets regulator." - Todd Blanche

Blanche's memo referenced Executive Order 14178, stating that clarity and certainty regarding enforcement policy "are essential to supporting a vibrant and inclusive digital economy and innovation in digital assets."

Industry Reaction and Future Outlook

At the same time, the SEC recently announced the formation of a new ‘Cyber and Emerging Technologies Unit’ to address misconduct related to cyber issues. Almost immediately after that, the decision was taken to eliminate NCET. This move is a testament to the continued importance of addressing cybercrime, even as the DOJ makes new efforts to restructure its approach.

The impact of this decision on the greater cryptocurrency industry has yet to be determined. Some advocates take this as an indication that these policies are being looked at less critically. For others, the policy shift is seen as a smarter use of government resources for enforcement.

“We are going to end the regulatory weaponization against digital assets.” - Donald Trump