Democrats Raise Alarms Over DOJ Deputy’s Crypto Holdings
A group of six Democratic senators has formally questioned Deputy Attorney General Todd Blanche for allegedly violating federal conflict-of-interest laws by easing crypto enforcement while holding substantial cryptocurrency assets. This development follows Blanche’s decision to disband the National Cryptocurrency Enforcement Team.
Conflict of Interest Allegations
The senators—Mazie Hirono, Richard Durbin, Elizabeth Warren, Sheldon Whitehouse, Christopher Coons, and Richard Blumenthal—expressed serious concerns in their written letter. They cite federal law 18 U.S.C. § 208(a), which prohibits government officials from participating in decisions that could directly impact their financial interests.
According to the letter, Blanche held crypto assets valued between $158,000 and $470,000, primarily in Bitcoin and Ethereum, at the time he issued the policy memo “Ending Regulation by Prosecution” in 2025. The memo effectively dismantled key regulatory oversight for the cryptocurrency sector.
Concerns Around Divestment Obligations
The senators further alleged Blanche failed to fulfill his promise to divest his crypto holdings “as soon as practicable.” Instead, he reportedly transferred those assets to family members, raising concerns about the divestiture’s legitimacy. This action failed to adequately mitigate the risk of financial influence.
“At the very least, you had a glaring conflict of interest and should have recused yourself,” the letter stated. The senators also demand full transparency, requesting records of all communications with cryptocurrency firms during critical periods. They set a clear deadline of February 11 for responses.
Broader National Security Worries
The senators warned about the broader repercussions of weakening crypto enforcement. They highlighted a January 2026 Chainalysis report, which revealed a 162% increase in illicit cryptocurrency transactions over the past year. They link this surge to the DOJ’s hands-off approach to regulating crypto exchanges, which they claim has facilitated crimes like drug trafficking, scams, and even sanction evasion.
Expert Opinions on Crypto and Ethics Concerns
Joshua Chu, co-chair of the Hong Kong Web3 Association, weighed in, stating that while holding crypto assets is not inherently problematic for senior DOJ officials, it becomes risky when those same officials alter regulations directly impacting the industry. He emphasized the potential for public skepticism and backlash, particularly during the 2026 election cycle: “An ethics investigation is the bare minimum.”
Meanwhile, Joe Ciccolo, President of BitAML, commented, “The crux of the issue isn’t limited to cryptocurrency; it’s about ensuring transparency and eliminating potential conflicts of interest across all asset types held by public officials.”
Where Does This Leave Cryptocurrency Regulation?
These evolving concerns underscore the critical importance of clear ethical standards when it comes to government oversight of emerging financial technology. As cryptocurrencies continue to reshape the financial landscape, maintaining transparency and ethics in enforcement remains paramount.
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Stay updated on this developing story and more insights into the intersection of crypto and government policies.
