Crypto Industry Calls on Congress to Reform DOJ’s Interpretation of Money-Transmitting Laws
A growing coalition within the cryptocurrency ecosystem is urging Congress to take action against the Department of Justice (DOJ) regarding its interpretation of money-transmitting laws that have recently impacted the developers of the crypto mixer Tornado Cash. In a letter dated March 26, 34 crypto firms and advocacy groups voiced their concerns to key congressional committees, asserting that the DOJ’s approach could unintentionally criminalize a wide range of blockchain developers.
Concerns Over Law Interpretation
The coalition, which includes notable names such as Kraken and Coinbase, expressed that the DOJ’s interpretation of existing laws poses a significant threat to the future of software development within the United States’ digital asset sector. The crux of the letter addresses how the DOJ’s stance suggests that essentially any blockchain developer could potentially face criminal charges under current money transmission regulations.
The controversy stems from the DOJ’s indictment of Tornado Cash developers Roman Storm and Roman Semenov in August 2023 for alleged money laundering activities. While Storm has been released on bail and has entered a plea of not guilty, Semenov remains at large. The letter argued that the DOJ’s recent actions not only create confusion in the regulatory landscape but also expose software developers to a heightened risk of prosecution.
Legal Definitions and Precedents
The letter intricately discusses two specific sections of the U.S. Code—Title 31 Section 5330, which delineates licensing requirements for money transmitting businesses, and Title 18 Section 1960, which makes it illegal to operate an unlicensed money transmitting business. It references guidance from the Financial Crimes Enforcement Network (FinCEN) issued in 2019, which clarified that developers who do not control customer funds should not be classified as operating a money-transmitting business.
Despite these guidelines, the coalition argues that the DOJ is disregarding FinCEN’s interpretations in favor of its own framework, leading to conflicting interpretations of "money transmission" across the federal landscape—an issue which they claim creates an unjust environment for compliant industry participants.
Potential Ramifications for Developers
The culmination of the coalition’s concerns indicates that if the DOJ’s interpretation remains unchallenged, it could impose legal liabilities on non-custodial software developers operating within the U.S. This chilling effect on innovation could stifle advancements in the blockchain space and push developers to relocate outside the country.
The letter further emphasizes that the ambiguity surrounding the law is detrimental to the stability and growth of the crypto industry. "The resulting fear among developers would effectively end the development of these technologies in the United States,” it warns.
In a related legal development, a fellow at the crypto advocacy group Coin Center, Michael Lewellen, has recently initiated a lawsuit against Attorney General Merrick Garland. His case seeks to have non-custodial software declared legal and aims to prevent the DOJ from applying money-transmitting laws to prosecute developers like himself.
As the debate unfolds, the coalition’s letter serves as a clarion call for Congressional oversight and reform in an effort to clarify regulatory expectations and protect the burgeoning digital asset industry in the U.S.
Conclusion
The response from the crypto community towards the DOJ’s handling of money transmission laws underscores the ongoing tensions between regulatory frameworks and the rapidly evolving digital economy. As lawmakers consider the implications of the DOJ’s interpretations, the resolution of this conflict may well shape the future of blockchain development in the United States.
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