An exclusive article by Fred Kahn
In a significant shift reflecting the current administration’s stance on cryptocurrency regulation, the U.S. government has recently abandoned anti-money laundering (AML) lawsuits against major crypto platforms Coinbase and Robinhood. This move aligns with President Donald Trump’s broader agenda of deregulating the financial sector, particularly concerning digital assets.
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SEC Concludes Investigations Without Enforcement
Robinhood’s Clearance
On February 24, 2025, Robinhood announced that the Securities and Exchange Commission (SEC) had concluded its investigation into the company’s crypto trading operations without pursuing any enforcement action. The probe, initiated in May 2024, focused on whether Robinhood had failed to register certain crypto assets as securities. Dan Gallagher, Robinhood’s Chief Legal Officer, expressed satisfaction with the outcome, stating, “Robinhood Crypto always has and will always respect federal securities laws and never allowed transactions in securities.”
Coinbase’s Legal Victory
Similarly, on February 21, 2025, Coinbase reported that the SEC had agreed in principle to dismiss its lawsuit against the exchange, pending approval from the commission’s three commissioners. The lawsuit, filed in June 2023, accused Coinbase of operating as an unregistered securities exchange and broker. Paul Grewal, Coinbase’s Chief Legal Officer, described the decision as a “complete win,” emphasizing the company’s commitment to regulatory compliance.
A Broader Trend of Deregulation
These legal developments are part of a broader trend of deregulation in the cryptocurrency sector under President Trump’s administration. Shortly after taking office in January 2025, President Trump issued Executive Order 14178, titled “Strengthening American Leadership in Digital Financial Technology.” This order revoked previous directives that were considered restrictive to the crypto industry and established a task force to propose a comprehensive federal regulatory framework for digital assets within 180 days.
The executive order also explicitly prohibits the establishment or promotion of a U.S. central bank digital currency (CBDC), signaling the administration’s preference for private sector-led digital asset initiatives over government-issued digital currencies. Additionally, the order supports the development of USD-backed stablecoins and encourages the reduction of compliance burdens on cryptocurrency exchanges.
Impact on AML Regulations and Financial Crime Prevention
The dropping of AML-related lawsuits against major crypto firms raises concerns about the broader impact on financial crime prevention. Historically, the SEC and the Financial Crimes Enforcement Network (FinCEN) have been aggressive in their oversight of cryptocurrency businesses, particularly in ensuring compliance with the Bank Secrecy Act (BSA) and AML regulations. However, the recent trend of regulatory pullbacks suggests a weakening of AML enforcement efforts in the digital asset space.
This shift is particularly notable given the Biden administration’s previous push for stricter AML compliance within the crypto sector. Under the Biden-era Infrastructure Investment and Jobs Act (2021), digital asset brokers were required to report transactions exceeding $10,000 to the Internal Revenue Service (IRS). However, the new administration appears poised to reverse many of these policies, prioritizing market expansion over stringent compliance.
The Tornado Cash Lawsuit and Its Implications
In addition to dropping cases against Coinbase and Robinhood, the U.S. government has taken a more controversial stance in the Tornado Cash lawsuit. Tornado Cash, a popular cryptocurrency mixing service, has faced legal action due to allegations of facilitating money laundering for criminal organizations, including cybercriminal groups linked to North Korea.
Despite industry pushback, the Department of Justice (DOJ) has continued its prosecution against Tornado Cash’s developers. The lawsuit argues that the developers knowingly created and maintained a platform used for illicit transactions, making them complicit in financial crimes. However, crypto advocates argue that Tornado Cash is merely a tool, and holding its creators liable sets a dangerous precedent for open-source software development.
The ongoing case highlights the U.S. government’s selective approach to crypto regulation. While major exchanges like Coinbase and Robinhood are seeing regulatory relief, platforms facilitating privacy-enhancing transactions face heightened scrutiny. The outcome of the Tornado Cash lawsuit could shape future policies on privacy-focused crypto technologies and determine the extent to which developers can be held accountable for how their platforms are used.
Industry Response: Support and Concerns
The deregulation trend has been met with mixed reactions from the financial and cryptocurrency industries. Many industry leaders have praised the administration’s efforts to ease restrictions, arguing that excessive regulation stifles innovation and forces crypto firms to move offshore. Brian Armstrong, CEO of Coinbase, commented, “A clear and predictable regulatory framework will allow the U.S. to maintain its leadership in financial technology and blockchain innovation.”
On the other hand, financial crime experts and consumer protection advocates worry that relaxed regulations could lead to increased illicit activity, including money laundering, fraud, and terrorism financing. Jennifer Fowler, a former U.S. Treasury official specializing in illicit finance, warned, “By rolling back AML requirements for crypto platforms, we risk creating an environment where bad actors can exploit digital assets for nefarious purposes.”
The Future of U.S. Crypto Regulations
With the SEC’s retreat from high-profile enforcement actions and the administration’s pro-business stance, the future of cryptocurrency regulation in the U.S. remains uncertain. The next 12 to 24 months will be crucial in determining how much influence federal agencies retain in overseeing digital assets. If deregulation continues at its current pace, the U.S. may shift toward a more permissive environment akin to jurisdictions such as Switzerland or Singapore, where crypto-friendly policies have attracted significant investment.
At the same time, international regulators, including the Financial Action Task Force (FATF), are expected to maintain pressure on the U.S. to uphold global AML standards. Whether the U.S. government will continue to backtrack on AML oversight or introduce new, more flexible compliance frameworks remains a key question for industry stakeholders and policymakers alike.
Conclusion
The abandonment of AML lawsuits against Coinbase and Robinhood marks a turning point in U.S. cryptocurrency regulation. Under the Trump administration, a clear shift toward deregulation is emerging, with a focus on fostering innovation and economic growth. While this may provide a boost to the digital asset industry, it also raises concerns about the effectiveness of financial crime prevention measures. The Tornado Cash lawsuit, however, demonstrates that enforcement may not be entirely relaxed, particularly when it comes to privacy-focused crypto tools. As the landscape evolves, the challenge will be to strike a balance between supporting the growth of crypto markets and ensuring robust safeguards against illicit financial activities.
Related Links
- SEC Official Statement on Robinhood Investigation
- Coinbase Legal Updates
- White House Executive Order 14178
- Financial Action Task Force (FATF) Guidelines on Crypto
- IRS Reporting Requirements for Digital Assets
