WASHINGTON — The Trump administration is sharply reducing the role of state regulators in policing parts of the cryptocurrency industry, a shift that could make it harder for officials to investigate complaints, monitor compliance and guard against money laundering and consumer harm, according to a new investigative report by the International Consortium of Investigative Journalists.
The move centers on a reinterpretation of banking rules that has allowed some crypto companies to obtain streamlined national banking licenses with limited federal oversight. Under the new approach, those firms may also be shielded from a wide range of actions by state regulators, effectively removing a layer of supervision that has long been considered essential in the fast-moving digital asset sector.
State banking and consumer protection authorities say the change is already having consequences. Linda Conti, superintendent of Maine’s Bureau of Consumer Credit Protection, told ICIJ that the state would lose the ability to act on complaints involving the affected firms. “We will not be able to address consumer complaints,” Conti said. “We will not be able to ask any questions of these entities.”
The shift arrives as the Trump White House is aggressively recasting federal policy on digital assets. In January, President Donald Trump signed an executive order titled Strengthening American Leadership in Digital Financial Technology, directing agencies to support the “responsible growth and use” of digital assets and blockchain technology while opposing central bank digital currencies. The order also created a working group to evaluate broader digital asset policy, including the possibility of a national stockpile of seized cryptocurrencies.
But critics say the administration’s broader approach goes beyond encouraging innovation and into the territory of deregulation. By loosening oversight while the crypto industry continues to expand, they argue, Washington is making it easier for major firms to operate with fewer checks on illicit finance risks and fewer avenues for state-level enforcement.
The Conference of State Bank Supervisors has sharply criticized the development. In a February letter to the Office of the Comptroller of the Currency, the group warned that companies granted these slimmed-down licenses could fall outside the scope of core federal banking laws and seek immunity from consumer protections under state law. The organization said that could create “a potential risk of tremendous harm to consumers.”
At issue is a regulatory system that has historically depended on a combination of federal and state oversight. State agencies have often been the first line of defense against fraud, poor compliance practices and suspicious activity involving money transmitters and crypto-linked firms. Federal oversight, meanwhile, has generally focused on national standards and broader anti-money-laundering rules. The Trump administration’s reinterpretation appears to weaken that balance.
The consequences are not limited to consumer protection. Experts say reducing state authority may also complicate efforts to enforce anti-money-laundering obligations in a sector that increasingly handles large transaction volumes and moves trillions of dollars in value annually. Crypto firms, by design, can operate across jurisdictions with relative ease, making coordinated oversight especially important.
The ICIJ report also describes a wider rollback of federal scrutiny. The Internal Revenue Service’s office responsible for examining anti-money-laundering safeguards at crypto exchanges has been cut back, weakening a watchdog already struggling to keep pace with the industry’s growth. Separately, the Justice Department disbanded a crypto crimes unit, saying it would still pursue illicit financing by individuals and enterprises but would no longer target the platforms used to conduct illegal activity.
That decision marked a notable change in enforcement philosophy. Rather than treating exchanges and related infrastructure as potential enforcement targets, the department signaled that its attention would shift primarily to bad actors using digital assets. Critics say that may leave a gap in oversight at the exact point where many illicit transactions can be detected or prevented.
The administration has also dismissed enforcement actions against more than a dozen crypto firms and granted pardons to several executives who had pleaded guilty to anti-money-laundering violations. Supporters of the policy argue that the industry has been hampered by inconsistent rules and an overly aggressive regulatory environment that discouraged investment and innovation. They say a more uniform federal framework could bring clarity and competitiveness to the United States.
Yet state regulators warn that uniformity should not come at the expense of accountability. New York authorities, in particular, have long been viewed as among the most active in monitoring crypto firms through the state’s licensing regime. According to the report, crypto company Paxos later shed its New York state license, a step experts said would likely make it harder for regulators to enforce promised compliance reforms.
The New York example reflects a broader concern: once firms move into a more favorable federal category, the ability of states to compel records, investigate misconduct or force corrective action may be sharply reduced. For regulators accustomed to a direct role in overseeing money transmitters and digital asset firms, the result is a possible blind spot in one of the fastest-evolving corners of the financial system.
Crypto advocates have long argued that the U.S. needs a clearer national framework and that state-by-state regulation can create uncertainty. But consumer advocates and anti-money-laundering experts counter that decentralizing oversight in the name of efficiency can weaken the very safeguards needed to police a high-risk industry.
The debate comes at a pivotal time for digital assets in the United States. The industry has gained political influence, expanded its market reach and increasingly sought legitimacy through mainstream banking access. At the same time, regulators continue to confront recurring fraud cases, hacking incidents, sanctions evasion concerns and questions about whether existing laws are sufficient to police crypto-native financial products.
For now, the administration appears committed to easing the path for crypto firms while reducing the reach of state enforcement. Whether that approach delivers the promised innovation — or opens the door to new abuses — is likely to remain one of the most contentious financial policy questions of the year.
Key developments at a glance:
- Some crypto firms have received streamlined national banking licenses with limited federal oversight.
- State regulators say they may lose authority to investigate complaints and compel information from those firms.
- The Trump administration has also cut back IRS oversight, disbanded a Justice Department crypto crimes unit, and dropped several enforcement cases.
- Supporters say the changes create a clearer national framework; critics warn they weaken consumer protections and anti-money-laundering safeguards.
As Washington redraws the rules for digital finance, state officials are warning that the country may be trading away a crucial layer of oversight at a time when the crypto industry is larger, faster and harder to police than ever before.