The DOJ Disbanding Crypto Enforcement Unit is a Massive Win for the Industry and Investors Alike

There was considerable pearl-clutching, at least among members of the mainstream media, when the US Department of Justice announced they were disbanding their crypto enforcement unit. The move, however, is a welcome change to industry participants and investors alike as the DOJ under the prior administration was mostly seen as unfairly targeting good operators in the space, or the developers of literal software tools like Tornado Cash.

Rather than signalling some descent into the Wild West, this move is about focusing enforcement efforts where they’re needed. Instead of targeting platforms or developers, the DOJ needs to focus its resources on identifying, arresting, and prosecuting the many bad actors in the space. It might be easier to target an exchange or software developers over perceived violations, but it won’t bring integrity or credibility to the space; in fact, it will be just the opposite. Suing an exchange like Kraken—literally one of the best and most responsible companies in crypto—makes the space look like a joke. Regulators are so clueless they’re going after the companies that operate honestly and with integrity? It’s shameful and a hallmark of laziness.

Indeed, the DOJ would threaten and pursue enforcement action against US-based companies because they were the lowest hanging fruit available. Meanwhile, any company operating in the United States voluntarily conducted business in a way that regulators would approve. So, by definition, good actors in crypto tend to choose to base their locations in the United States. Actors that want a little more flexibility are more likely to operate offshore, thus further from regulators' grasp.

Punishing good actors just because they are in your jurisdiction is a losing enforcement strategy, so I’m glad that’s over. I do worry, however, that ongoing political polarization of the crypto space means that the next administration could take a much more hostile stance. However, growing the industry by solving problems for real people will help insulate it from these risks. I wonder: now that we have friendly regulators, what will be the outcome? Will the industry become more legitimate and solve real problems? Or will it descend further into financial nihilism, scams, and insider trading? Time will tell, but I suspect we’ll see a little of both the former and the latter.