U.S. Department of Justice Dismantles Crypto Division, Signaling Sweeping Deregulation for Exchanges and Cold Wallets

#Trump #Exchanges #ColdWallets

According to a report by Fortune Magazine, the U.S. Department of Justice (DOJ) notified staff on the evening of April 7 that it is “dissolving a division dedicated to cryptocurrency-related investigations.” In a four-page internal memo reviewed by Fortune, Deputy Attorney General Todd Blanche announced the decision, stating:“The DOJ is not a digital asset regulator. However, the previous administration used the Department to pursue a reckless strategy of enforcement-through-prosecution.”

Todd Blanche, the DOJ’s second-highest-ranking official and Donald Trump’s defense attorney during his 2024 criminal trial, wrote that this move is part of the Department’s efforts to comply with President Trump’s January executive order on digital assets, which aims to “create regulatory clarity for the industry.”

As part of the Monday memo, Blanche instructed DOJ staff to focus on “prosecuting those who harm digital asset investors” rather than targeting crypto exchanges, mixers like Tornado Cash, or offline wallets (cold storage).

Is This Good News?Absolutely.This is not only positive news — it also marks a fundamental shift in the U.S. regulatory framework for digital assets.We can reasonably foresee that regulation of virtual currency exchanges and cold wallets will be significantly relaxed, ushering in new growth opportunities for the entire digital asset market.

Even Though It’s Not an Official Policy Announcement, the Market Is Already Reacting.Let’s casually list a few examples:

• The Wall Street Journal reports that JPMorgan is restarting its long-paused JPM Coin cross-border payment project, which had been shelved for two years.
• Goldman Sachs’ Digital Assets team is reportedly planning to launch a Bitcoin-structured product for qualified investors in Q2.
• Binance, which previously withdrew from the U.S. market due to regulatory pressure, has now hinted that it is “re-evaluating its compliance architecture.”
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U.S. Regulatory Policy: From Full-Scale Crackdown to Full-Scale Deregulation

1. The Biden Administration’s Era of Enforcement

Let’s start with the background. During the Biden administration, regulatory policy generally leaned toward tightening oversight of the cryptocurrency market. The Biden team emphasized investor protection and financial market stability, promoting more regulations related to anti-money laundering (AML), consumer protection, and market transparency.

Regulators intensified their supervision of crypto exchanges, ICO projects, and other digital asset businesses, aiming to curb money laundering, fraud, and other financial crimes. The overall approach could be described as a “full-scale crackdown”, aiming to establish clearer rules for the market by suppressing illicit activities.

As part of this push for regulatory enforcement, the Department of Justice (DOJ) played an aggressive role — frequently launching investigations and prosecutions against crypto companies on charges of money laundering, fraud, and other violations. While these actions did enhance enforcement against criminal behavior, they also sparked concerns within the market and the broader crypto industry about regulatory overreach and interference with free market dynamics.

Some industry voices argued that the DOJ’s actions were less about protecting consumers and more about “selective enforcement”, which risked stifling innovation in the crypto space and undermining the industry’s overall health and development.

2. Trump’s Ongoing Deregulatory Push

In contrast, Trump’s regulatory approach prioritizes reducing government intervention in market operations. He believes that overly harsh regulations suppress innovation and increase compliance burdens for businesses. As part of his broader “America First” strategy, Trump has advocated loosening restrictions on crypto-related activities, particularly in areas such as virtual asset exchanges and cold wallets.

As a result, current DOJ leadership is shifting its regulatory focus, aiming to allocate limited enforcement resources more effectively toward genuinely harmful behaviors that threaten investor interests.

In the recent DOJ memo, Deputy Attorney General Todd Blanche clearly stated that future efforts would focus on prosecuting those who harm digital asset investors, rather than targeting crypto exchanges, mixers like Tornado Cash, or cold wallet providers.

This shift not only reflects a reassessment of the industry’s current landscape, but also implies an acknowledgment of digital assets as legitimate emerging financial instruments with long-term potential.

Impact of Regulatory Relaxation: Crypto Exchanges

In the past, the Department of Justice (DOJ) and other enforcement agencies exercised strict oversight over crypto assets, often targeting exchanges for compliance issues, anti-money laundering (AML) protocols, and Know Your Customer (KYC) procedures. This led to two major consequences:

1. Increased compliance costs for businesses;
2. Forced shutdowns or relocations of exchanges to more regulation-friendly jurisdictions due to insufficient preparedness — raising not only compliance costs but also operational expenses.

The recent dismantling of the DOJ’s crypto enforcement unit sends a clear message:In the context of a trade war, the U.S. government now aims to reduce interference in the day-to-day operations of crypto exchanges, provided investor safety is maintained. The goal is to encourage market innovation and growth, thereby consolidating the U.S. as a dominant player in the global digital asset economy.

Put simply, the trade war is fundamentally a war over the U.S. dollar system. Trump’s vision is to allow a parallel crypto ecosystem to flourish within U.S. borders, independent of the traditional dollar framework, in order to attract more capital inflows into the American crypto market.

Regardless of the original political motives, as regulatory efforts shift toward targeting specific, verifiable cases of fraud or investor harm, exchanges will now be able to operate in a more relaxed and clearly defined policy environment.
This is undoubtedly a major positive shift for a crypto industry that has long suffered from regulatory uncertainty.

A friendlier regulatory environment is likely to attract more capital, boost investor confidence, and accelerate the maturity of the digital asset market. As global capital shows increasing interest in crypto asset allocation, exchange compliance will gradually rely more on industry self-regulation and market competition, rather than administrative interventions.
This trend may soon reshape the current market landscape and create space for the rise of new types of platforms and exchanges.

Impact of Regulatory Relaxation: Crypto Wallets

Compared to exchanges, cold wallets — offline tools used to store digital assets — have long existed in a regulatory gray area. While cold wallets offer greater security and privacy, they have also been exploited by bad actors for money laundering, tax evasion, and other illicit activities.

Historically, the U.S. and other countries have tried to clamp down on cold wallets through tighter regulation, aiming to block illegal capital flows. However, these efforts have often been ineffective, while also triggering public concern over privacy rights and asset freedom.

The DOJ’s latest policy shift, which removes cold wallets from the enforcement priority list, can also be interpreted as a recognition of the right to privacy for digital asset holders.
For the broader user base, a more relaxed regulatory environment means less administrative interference in managing and storing digital assets via cold wallets — thus improving both security and convenience.

According to a Grand View Research report, the global crypto wallet market was valued at $8.42 billion in 2022. It is expected to grow at a compound annual growth rate (CAGR) of 24.8% from 2023 to 2030, reaching $48.27 billion by 2030.

In this context, the regulatory relaxation is a strong tailwind for the cold wallet sector.As for the full extent of the impact, that will be determined by how the market evolves and validates this shift in the coming years.

Conclusion

The shift in U.S. regulatory policy from “full-scale crackdown” to “comprehensive deregulation” represents not only a proactive adjustment aimed at promoting healthy industry development, but also a strategic response to rising international competitive pressures.

While a more relaxed regulatory environment can stimulate market vitality and lower barriers to innovation, it also raises new demands for effective financial risk management.

Regulatory policy has always been a key variable in market development. Decisions made by the Federal Reserve and other major U.S. regulatory agencies not only influence the trajectory of the domestic economy, but also carry profound implications for the global financial system.

In a world of growing economic uncertainty and intensifying global competition, finding the optimal balance between regulatory easing and risk control is both a critical challenge for policymakers and a serious question for market participants to consider.