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As the cryptocurrency industry experiences rapid growth in the United States, a concerning trend has emerged: a significant reduction in the number of federal investigators dedicated to safeguarding against illicit financial activity within the sector. Federal data reveals that the number of investigators assigned to review safeguards against dirty money in the crypto industry plummeted last year to the lowest level since at least 2017, raising alarms among financial crime experts.

The cuts directly impact the anti-money laundering watchdog’s office within the U.S. Internal Revenue Service (IRS), which is responsible for overseeing protections against illicit funds flowing through cryptocurrency exchanges and other registered money service businesses. Even prior to these reductions, the IRS faced challenges in effectively monitoring the rapidly expanding crypto landscape, according to industry observers. This weakening of oversight comes as cryptocurrency transactions, valued in the trillions of dollars annually, become increasingly prevalent.

“The reduction in supervisory staff at the IRS matches a trend we’ve seen across [anti-money laundering] enforcement agencies,” said Erica Hanichak, deputy director at the FACT Coalition, a Washington-based nonprofit advocating for stronger safeguards against illicit financial flows. “This sends the signal that the US is open to dirty money. It undermines our national security and market integrity.” The IRS did not respond to requests for comment.

The decline in enforcement resources coincides with a period where cryptocurrency has been implicated in several high-profile money laundering schemes. Last November, the International Consortium of Investigative Journalists (ICIJ), in collaboration with 37 media partners across 35 countries, published “The Coin Laundry,” an investigation exposing the movement of illicit funds within the cryptocurrency industry. The investigation revealed that, as recently as July 2025, Huione Group, a Cambodian financial institution identified by U.S. Authorities as a “primary money laundering concern” in May, transferred substantial sums of cryptocurrency to major exchanges like Binance and OKX. These transactions continued even after U.S. Authorities flagged significant deficiencies in the firms’ anti-money laundering protocols.

IRS Staffing Cuts and the Rise of Crypto Crime

Cryptocurrency exchanges, which allow users to buy, trade, and deposit digital assets, likewise serve as a convenient avenue for converting crypto into traditional currency – a key objective for those seeking to launder illicit funds. U.S. Regulators categorize these exchanges as money services businesses (MSBs), similar to companies like Western Union. Though, even before the recent staffing cuts, the IRS office responsible for overseeing these businesses struggled to adequately supervise cryptocurrency operations, according to a report by the agency’s inspector general.

In 2021, then-IRS Commissioner Charles Rettig communicated to Congress the agency’s need for increased staffing to address the “rapidly evolving and expanding” cryptocurrency industry. That year, the IRS had 193 agents dedicated to examining the anti-money laundering protocols of crypto exchanges and other MSBs, a significantly higher number than in 2025, according to federal data. Rettig emphasized that conducting MSB examinations is “an inherently laborious activity” requiring “reinforcements” and increased funding for personnel, travel, and analytical tools.

Whereas Congress allocated tens of billions of dollars in additional funding to the IRS in 2022, enabling the agency to expand its ranks and modernize its systems, these gains were short-lived. Early last year, cost-cutting measures implemented by the Trump administration halted this progress, leading to the rapid dismissal of many newly hired personnel as Republicans in Congress also reduced the allocated funds. In April, a Justice Department unit focused on investigating crypto-related crimes was disbanded, with the department stating it would continue to pursue illicit financing but 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.

Lowest Staffing Levels in Years

The number of IRS investigators assigned to oversee anti-money laundering defenses at crypto firms and other money transmitters fell by 33 percent in 2025, dropping to 139 agents from 208 in 2024. This represents the lowest level of staffing in the dataset, which dates back to 2017, according to data obtained by ICIJ through a public records request. Some U.S. States also contribute to the supervision of anti-money laundering practices at MSBs.

Christina Rea, a compliance specialist advising crypto firms on IRS anti-money laundering examinations, noted the agency’s struggle to preserve pace with the evolving complexities of the cryptocurrency sector. She explained that a small and dwindling group of IRS agents with specialized virtual currency expertise are tasked with overseeing a rapidly growing and increasingly sophisticated financial ecosystem. “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. “Compared to 2017 and 2018, today’s firms are larger, more interconnected with traditional financial institutions, and operating far more sophisticated platforms, and yet examiner resources appear to have decreased rather than expanded.”

Alison Jimenez, an anti-money laundering expert, highlighted the disparity in oversight between cryptocurrency exchanges and traditional banks. She stated that the IRS’s lighter touch on nonbank financial institutions often results in violations going unaddressed, even when identified by investigators. “These are juggernaut financial institutions,” Jimenez said. “They are larger than a lot of banks but they are not getting the frequency of examinations or the in-depth examinations that banks acquire. If there are violations found, there is often no formal action taken.” Jimenez warned that fewer examiners could lead to more undetected vulnerabilities and potentially larger scandals impacting consumers and the broader industry, describing cryptocurrency oversight as a “very loosely knitted-together safety net” that is now “just getting pulled farther apart.”

The reduction in oversight resources raises concerns about the ability of U.S. Authorities to effectively combat the use of cryptocurrency for illicit purposes. As the industry continues to mature and integrate with traditional financial systems, the need for robust regulatory frameworks and adequate enforcement capabilities remains critical.

What comes next will depend on how the current administration prioritizes crypto regulation and whether Congress allocates additional resources to the IRS for this purpose. The ongoing evolution of the cryptocurrency landscape will undoubtedly require continued vigilance and adaptation from law enforcement agencies to mitigate the risks of financial crime.

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