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Anti-financial crime professionals, including former U.S. officials, agree that a four-page memorandum issued by U.S. Deputy Attorney General Todd Blanche on April 4 marks a “very significant” change in the federal government’s posture towards cryptocurrency exchanges.

But they differ over what the long-term effects of the memo will be, particularly its impact on the future enforcement landscape and how virtual asset service providers, or VASPs, will respond to the changes.

Blanche directed the Justice Department to pull back from pursuing investigations and indictments of VASPs for Bank Secrecy Act violations and to focus instead on the criminals using those platforms to launder funds.

In the same memo, Blanche ordered the dismantling of the Justice Department’s National Cryptocurrency Enforcement Team, or NCET, leaving cases the unit was pursuing in limbo.

ACAMS moneylaundering.com’s Washington, D.C.-based reporter, Charlie Passut, talked one-on-one with three senior anti-financial crime professionals about the Blanche memo.

An edited transcript of their remarks follows.

How will oversight of cryptocurrencies change following the Blanche memo?

Jim Richards, who led financial crimes risk management at Wells Fargo: I don’t think this [strategy] has been particularly well thought out. We will see a lot more roguish, if not criminal, behavior out of the [crypto] industry. They simply don’t fear prosecution. They don’t have a functioning regulatory regime they have to be particularly concerned about. And so, off they go.

Dan Stipano, former deputy chief counsel for the Office of the Comptroller of the Currency: It’s a clear signal from the administration that, at least in terms of crypto enforcement policy, the targets of enforcement actions are not going to be crypto exchanges or crypto platforms, but rather the bad actors that transact through those exchanges around those platforms.

Ari Redbord, global head of policy and government affairs at TRM Labs: We are seeing a shift in prosecutorial discretion. This announcement does not mean there won’t be enforcement, it means that enforcement will be directed at the criminals.

What will happen to the cases the disbanded NCET was pursuing?

Richards: That was the oddest thing about the memo. You would think that they would want to have a crack team of folks, which is NCET.

The existing stuff [at NCET], I don’t think it’s going to go anywhere. It doesn’t make a lot of practical sense, but it makes obvious sense when you realize this administration seems somewhat enamored with the digital assets industry.

Stipano, now an attorney with Davis Polk in Washington, D.C.: They’ll review the cases that are out there and make some decisions as to whether they want to continue to pursue them or not. But in this environment, it seems like there’s at least a decent chance that they will not pursue those cases.

Redbord, a former senior advisor to Treasury’s Under Secretary for Terrorism and Financial Intelligence: This is in part a reorganization, moving the NCET cases into long standing DOJ sections like computer crime, fraud and money laundering.

Will the SEC, FinCEN and the CFTC offer sufficient oversight of crypto?

Stipano: Regulation of crypto in general has been very spotty. It falls among several agencies and there’s no one agency that’s really tasked with it. It’s clear that under current leadership, the SEC is not going to be an aggressive regulator of crypto. FinCEN is woefully understaffed. The CFTC has a role to play, but again, I think the same policy is going to apply.

The question I have is, what happens to the gatekeepers, the companies that actually provide access to the blockchain? It’s clear that the whole crypto area continues to be attractive to criminals and criminal organizations, so it’s very important from a policy standpoint that you have effective oversight.

Richards: I don’t know if they have the horsepower to do it. [Exchanges] don’t really have to worry about regulation, supervision and enforcement of regulations. They’re not going to get prosecuted unless something really horrible happens. It’s going to be the Wild West for these guys, they can do what they want to do.

Redbord: The expertise is absolutely there, but oversight in crypto isn’t just about expertise – it’s about giving FinCEN, the CFTC, and the SEC the budget, the technology, the training, and the personnel to stay ahead of threat actors exploiting new technologies. Without that investment, we risk asking regulators to police tomorrow’s financial system with yesterday’s tools.

What do you find encouraging in the Blanche memo?

Redbord: I think the key is that we will be seeing a freeing up of resources from regulators who have been focused on non-compliance from otherwise lawful businesses which will ensure robust resourcing to go after real bad actors.

What concerns you about the memo?

Richards: If the proceeds of a hack are flowing through a digital currency exchange, and the exchange either has no [AML] program or such a deficient program that it’s willfully laundering money, are they going to go after them or are they not going to go after them? It’s hard to tell.

I wish the memo had said the classic case that we still want you guys to go after is the Binance case. Gutting the regulatory side and not prosecuting on the other side is sending a very interesting message.

Will digital asset platforms reduce or even eliminate their BSA efforts following the memo?

Stipano: The responsible players in the crypto industry are not going to dismantle their AML programs. They’ve invested a lot of time and money into those programs and they’re smart enough to realize that things change. We could have a Democratic-controlled Congress in two years. We could have a Democratic-controlled White House in four years. We could have another FTX at any time. Any of those things could change the environment very quickly.

Redbord: There is no reason to believe VASPs [virtual asset service providers] won’t have controls in place. VASPs are motivated to keep bad actors off their platforms.

What entities, moving forward, will pursue money laundering charges involving crypto?

Stipano: I’m not really sure what’s going to happen because DOJ disbanded their crypto task force. You still have MLARS [Money Laundering and Asset Recovery Section], at least for the time being. Will MLARS pursue these cases or will MLARS itself go away and get folded into another part of DOJ? It’s just an awful lot of uncertainty right now.

Richards: MLARS is still there.

Redbord: These investigations will continue to be led by law enforcement – DOJ, HSI, the FBI, IRS-CI – and supported by regulators like FinCEN. But they’ll only be successful if we invest in the tools and training investigators need to detect crypto-related money laundering in real time.

Contact Charlie Passut at cpassut@acams.org