Crypto will have fewer eyes on some of its moving parts after today, particularly exchanges and offline, or cold, crypto wallets.
President Donald Trump's administration announced Monday night in a memo that it's disbanding the National Cryptocurrency Enforcement Team, which was established in 2022 to combat cryptocurrency fraud. In 2023, crypto scams cost victims more than $5.6 billion, according to an FBI report.
"The prior Administration used the Justice Department to pursue a reckless strategy of regulation by prosecution, which was ill conceived and poorly executed," Deputy Attorney General Todd Blanche said in the memo.
Trump previously said that he intends to make the US the "crypto capital of the world." It's worth noting that Trump and his family stand to make a lot of money from crypto, having launched his own TRUMP coin in January and having a 75% stake in crypto bank World Liberty Financial.
By eliminating the NCET, cryptocurrency -- a sector ripe with scams and rug pulls -- could become even riskier. Here's what you need to know.
What's changing with how regulators can target crypto fraud?
In the memo, Blanche ordered the Justice Department to stop targeting crypto exchanges, offline wallets, and mixing and tumbling services. Mixing and tumbling involves combining illicit digital currencies with legitimate currency to obscure their origin.
Instead, the Justice Department will focus on investigations and prosecutions of conduct that victimize investors, such as embezzlement on exchanges, digital asset investment scams, and fake digital asset development projects such as rug pulls.
The Justice Department will also examine cases involving drug cartels and organized crime that use cryptocurrency to further their activities, according to the memo.
What can you do to protect yourself from crypto fraud?
While focusing on those digital crimes isn't objectively bad, it comes at the cost of the NCET and less scrutiny of crypto exchanges and offline wallets, which most smaller crypto investors use.
Eliminating the NCET, which investigated criminal use of digital assets, could potentially make investing in crypto -- an already risky investment type -- even riskier.
To keep your investments safe, verify the legitimacy of whichever projects you want to invest in. Doing your own research is a good way to detect whether a project is legitimate. If you're worried about scams, take a second to collect yourself. Slowing down in the heat of the moment can go a long way.
Think about whether the communications are unusual. They may sound too good to be true, have excessive pressure to complete the trade quickly and have sparse details about the project. Avoid "get rich quick" schemes.
And of course, be careful with your seed phrase. Don't misplace it and don't give it out to anyone.
