IRS Crypto Oversight Weakens as Illicit Flows Surge
As cryptocurrency use in the United States surges, the number of federal investigators assigned to review safeguards against dirty money in the industry plummeted last year to the lowest level since at least 2017, according to federal data obtained by the International Consortium of Investigative Journalists (ICIJ). This reduction in oversight comes as cryptocurrency increasingly plays a role in money laundering scandals.
Staffing Cuts and Their Impact
The cuts weaken the anti-money laundering watchdog’s office within the U.S. Internal Revenue Service (IRS), which is tasked with overseeing protections against dirty money in crypto exchanges and other firms registered as so-called money service businesses. Even before the recent reductions, the IRS struggled to oversee dirty money in the speedy-growing crypto sector, according to experts.
Erica Hanichak, deputy director at the FACT Coalition, a Washington-based nonprofit group that advocates for strong safeguards against illicit financial flows, stated that the reduction in supervisory staff “sends the signal that the US is open to dirty money. It undermines our national security and market integrity.”
In 2025, the number of IRS investigators assigned to oversee anti-money laundering defenses of crypto firms and other money transmitters fell 33 percent to 139 agents, down from 208 in 2024. This figure represents the lowest level in the dataset, which dates back to 2017.
The Coin Laundry Investigation
The ICIJ, in collaboration with 37 media partners in 35 countries, published The Coin Laundry investigation in November 2025. This investigation revealed that, as of July 2025, Huione Group, a Cambodian financial institution flagged by US authorities as a “primary money laundering concern,” sent large sums of cryptocurrency to accounts at major exchanges like Binance and OKX. These fund flows continued even after US authorities identified problems with the firms’ anti-money laundering protocols.
Cryptocurrency exchanges facilitate the buying, trading, and depositing of cryptocurrency, and also provide a means to convert crypto assets into standard currency – a key objective for many involved in money laundering.
Historical Context and Regulatory Challenges
U.S. Regulators classify crypto exchanges in the same category as money services businesses (MSBs) like Western Union. In 2021, then-IRS commissioner Charles Rettig informed Congress that the agency needed more staff to address the “rapidly evolving and expanding” cryptocurrency industry, with 193 agents dedicated to examining anti-money laundering protocols.
Although Congress awarded the IRS tens of billions of dollars in additional funding in 2022, the Trump administration’s subsequent cost-cutting measures halted this progress, leading to the firing of many new hires and a reduction in awarded funds. A Justice Department unit investigating crypto-related crimes was disbanded in April, with the department stating it would focus on pursuing the individuals and enterprises involved in illicit financing rather than the platforms themselves. The administration also dropped enforcement actions against over a dozen cryptocurrency firms and pardoned crypto executives convicted of anti-money laundering violations.
Expert Concerns
Alison Jimenez, an anti-money laundering expert, noted that cryptocurrency oversight is “a very loosely knitted-together safety net,” and that it is now “just getting pulled farther apart.” Christina Rea, a compliance specialist advising crypto firms on IRS examinations, observed that the agency appears to be struggling to keep pace with the growth and complexity of the crypto ecosystem. She highlighted that the number of examiners overseeing crypto exchanges has decreased while the industry has grown significantly in scale and risk exposure.
Jimenez further explained that, compared to the oversight of large banks, crypto exchanges receive less frequent and less in-depth examinations, and violations often go without formal action. This lack of rigorous oversight could lead to undetected problems with anti-money laundering safeguards, potentially resulting in larger scandals that harm consumers and the industry.