The number of federal investigators focused on policing illicit financial activity within the rapidly expanding cryptocurrency industry has plummeted to its lowest level since 2017, according to data obtained by the International Consortium of Investigative Journalists. This reduction in oversight comes as cryptocurrency apply surges in the United States and concerns mount over its potential for facilitating money laundering and other financial crimes. The shrinking investigative force raises questions about the government’s commitment to regulating a sector now valued in the trillions of dollars.
The cuts specifically impact the anti-money laundering watchdog’s office within the Internal Revenue Service (IRS), the agency responsible for overseeing cryptocurrency exchanges and other “money service businesses.” Even before these recent reductions, experts say the IRS struggled to keep pace with the complexities of the crypto market. The situation is further complicated by a broader trend of easing oversight of crypto exchanges, particularly during the Trump administration, and a recent disbanding of a Justice Department unit dedicated to investigating crypto-related crimes.
The decline in investigators is stark. In 2021, the IRS had 193 agents examining the anti-money laundering protocols of crypto firms and other money transmitters. By 2025, that number fell by 33 percent to 139, the lowest in the dataset dating back to 2017. This decrease doesn’t necessarily indicate layoffs, but rather a reassignment of personnel away from examining nonbank financial institutions, which include cryptocurrency exchanges. The trend coincides with a period of significant growth in the crypto ecosystem, with firms becoming larger, more interconnected with traditional finance, and operating increasingly sophisticated platforms.
A “Loosely Knitted-Together Safety Net”
The reduction in oversight has prompted concern among anti-money laundering experts. Erica Hanichak, deputy director at the FACT Coalition, a Washington-based nonprofit advocating for stronger financial safeguards, warned that the cuts “send the signal that the US is open to dirty money” and “undermines our national security and market integrity.” Alison Jimenez, another anti-money laundering expert, described cryptocurrency oversight as a “very loosely knitted-together safety net,” adding that This proves now being “pulled farther apart.”
The concerns are underscored by recent investigations, including one published last November by the ICIJ, dubbed The Coin Laundry. The investigation, conducted in collaboration with 37 media partners in 35 countries, revealed that even after being flagged by U.S. Authorities as a “primary money laundering concern,” Huione Group, a Cambodian financial institution, continued to send large sums of cryptocurrency to major exchanges like Binance and OKX as recently as July 2025. This occurred despite known problems with the exchanges’ anti-money laundering protocols.
Shifting Priorities and Funding Cuts
The current situation represents a reversal of earlier efforts to bolster the IRS’s cryptocurrency enforcement capabilities. In 2021, then-IRS Commissioner Charles Rettig wrote to Congress requesting additional staff to address the “rapidly evolving and expanding” cryptocurrency industry. He emphasized the “laborious” nature of examining money service businesses and the need for increased funding for personnel, travel, and analytical tools.
Congress responded in 2022 by awarding the IRS tens of billions of dollars in additional funding, leading to an initial expansion of its ranks and modernization efforts. However, this progress was short-lived. Early last year, cost-cutting measures implemented by the Trump administration led to the firing of many of the newly hired agents, and Republicans in Congress clawed back a significant portion of the awarded funds.
Further complicating matters, the Justice Department disbanded a unit focused on crypto-related crimes in April, stating it would still pursue illicit financing but would not target the platforms themselves. The Trump administration also reportedly dropped enforcement actions against over a dozen cryptocurrency firms and pardoned executives who had previously pleaded guilty to anti-money laundering violations.
The Challenge of Oversight
Christina Rea, a compliance specialist advising crypto firms on IRS examinations, points to a growing gap between the complexity of the crypto market and the agency’s resources. She notes that a small and dwindling number of IRS agents possess the specialized expertise needed to oversee a rapidly evolving sector. “What’s notable is that this contraction appears to be happening while the regulated crypto and fintech ecosystem has grown dramatically in scale, transaction volume, product complexity and risk exposure,” Rea told ICIJ.
Jimenez echoed this sentiment, highlighting the disparity in oversight between cryptocurrency exchanges and traditional banks. She explained that crypto firms, often larger than many banks, receive less frequent and less in-depth examinations, and even when violations are found, formal action is often not taken. This lighter touch, she warns, could allow problems with anti-money laundering safeguards to go undetected for longer, potentially leading to larger scandals and harming consumers.
The U.S. Classifies crypto exchanges as money services businesses (MSBs), alongside companies like Western Union. However, the IRS’s oversight of these nonbank financial institutions remains significantly less robust than its oversight of traditional banks.
The situation is evolving. The IRS is scheduled to provide an update on its cryptocurrency enforcement efforts to Congress later this year. Readers interested in learning more about the ICIJ’s investigation into dirty money in the cryptocurrency industry can identify additional information on their website. The International Consortium of Investigative Journalists continues to report on this developing story.
Disclaimer: This article provides information for general knowledge and informational purposes only, and does not constitute financial or legal advice.
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