Criminals are watching the DOJ’s crypto shift. We should do that too

The Justice Department recently issued new guidance instructing prosecutors to reduce their efforts to investigate and litigate cryptocurrency crimes. This will disband the government’s National Cryptocurrency Enforcement Team (NCET) to prioritize immigration and procurement issues regarding cryptocurrency enforcement. While the DOJ frames this as a resource-rationalizing movement, threat actors are watching and adapting.

It’s too early to observe the impact of cryptocurrency on the world, but I think this move is more than a bureaucratic shuffle. It shows the vacuum of enforcement where cybercriminals are rushed to fill.

Once regulations relax, scams continue

Cybercrime is highly adaptable and thriving in moments of regulatory ambiguity. Criminal execution, whether it is a blue or white-collar crime, takes notes by threat actors and shifts operations outside the boundaries of actions that are often prosecutable. The same can be said for the cryptocurrency space.

In the digital economy, especially in the decentralized, unregulated, fast-moving world of Web3 and crypto, this grey area is a fertile basis for spoofed fraud, fake airdrops, phishing campaigns and spoofed tokens.

Even before this policy was changed, scams including fake coins, phishing sites and wallet sucking had already risen. Cryptocurrency fraud has reached a loss of $5.6 billion, up 45% since 2022, according to the FBI’s latest cryptocurrency fraud report.

Now, as the glare of federal scrutiny moves away from the crypto space, vulnerable brands in individuals, exchanges and other ways must prepare for an increase in cryptocurrency fraud. Cybercriminals continue to abuse platforms and dupe investors, especially in a space where technical complexity, anonymity and lack of regulations already hinder detection and enforcement.

Reactions from the field: Relief or concern?

The administration’s decision to reconsider code enforcement has already drawn mixed responses from legal experts. Legal experts reflect feelings that movements could elicit fraud.

In a statement to the Washington Post, Law Professor Yeshayadav at Vanderbilt University highlighted the importance of NCET in disrupting criminal activity throughout the crypto space, and may find it difficult for the government to prosecute “the incredibly agile and highly opportunistic actors of this space.”

Similarly, Nate Sibley, Kleptocracy initiative director and anti-corruption expert, stressed that “dangerous US enemies rely on cryptocurrencies to wash their money and avoid sanctions.”

However, there are other songs within the industry. The Defi Education Fund, an advocacy group led by executives of organizations including Amanda Tuminelli’s Coinbase and Kraken, said it was encouraging that DOJ has announced it will redirect resources to indict a real, harsh bad actor for exploiting technology, rather than building our financial future.

On the one hand, external experts warn that the move could lead to an increase in cybercrime, and people within the industry argue that focusing on crimes related to terrorism and drug cartels is a better use of resources. You know which side is correct.

Friction-free fraud: AI lowers bar for bad actors

Complicating the issue is the increased use of AI by attackers. With the weapons of AI tools generated at the fingertips of people with internet connections, scammers can now create scams that go beyond phishing links. They are the complete ecosystem of deception. Fake social media accounts, copycat token launches, cloned websites, and Ai-generated influencers push the scam.

result? Not only is digital fraud more common, it’s become more reliable and difficult to detect.

What does this mean for people trying to build a more secure crypto ecosystem?

How the crypto community can respond

As the US government repeats its crime focus, the responsibility for protecting investors and brand reputations falls even further into the private sector. Here’s how blockchain platforms, exchanges, brands and investors operating in this area respond:

1. Audit brand boundaries: Scan fraudulent token lists, fake domains and fraudster accounts regularly.
2. Use threat intelligence technology: AI-powered surveillance can detect spoofed websites and phishing campaigns across Web2 and Web3.
3. Engage with regulators early: Please don’t wait for the restrictions to be met. Predict it and build a compliant and reliable system before it’s too late.
4. Work together throughout the ecosystem: Whether you’re a small investor or exchange for billions of dollars of assets under your control, sharing information between platforms (i.e. between exchanges, social media platforms, wallet providers) is key to identifying new fraud patterns.

The DOJ pivot may be strategic. But its ripple effects – especially in fast-paced spaces, are already visible. If you’re building on Web3, now is the time to bolster your defenses. Because for every dollar the government pulls back, bad actors are investing ten times more.

Trust is at the heart of all traditional or decentralized financial systems. And now trust is one of the biggest vulnerabilities in crypto. Coupled with limited enforcement, broad impersonation and fraud have created a sense of skepticism that keeps the wider public on the sidelines.

If a company operating in the crypto space wants digital assets to become mainstream, they need to take ownership of building trust from scratch. That means doubling transparency, accountability and positive protection. Recruitment remains an exception until trust becomes the norm.