A coalition of 34 cryptocurrency firms has urged Congress to intervene and amend the Department of Justice's (DOJ) interpretation of money transmission laws, which they argue poses a significant threat to software developers in the blockchain space. This call to action follows the indictment of Tornado Cash developers, raising concerns about the future of open-source development in the U.S.
Key Takeaways
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A coalition of 34 crypto firms has sent a letter to Congress urging changes to the DOJ's interpretation of money transmission laws.
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The DOJ's stance could criminalize the actions of software developers who do not control user funds.
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The letter highlights conflicting interpretations between the DOJ and the Financial Crimes Enforcement Network (FinCEN).
Background on the DOJ's Interpretation
In August 2023, the DOJ charged Tornado Cash developers Roman Storm and Roman Semenov with money laundering under 18 U.S.C. §1960, which criminalizes operating an unlicensed money transmitting business. This marked a significant shift in how the DOJ interprets the law, suggesting that even developers of non-custodial software could face criminal charges.
The letter from the crypto coalition, which includes major players like Coinbase and Kraken, argues that the DOJ's interpretation is overly broad and creates confusion within the industry. They assert that this interpretation could lead to the prosecution of virtually any blockchain developer, stifling innovation and development in the U.S.
Conflicting Standards Between DOJ and FinCEN
The crux of the issue lies in the definitions of a "money transmitting business" as outlined in two sections of the U.S. Code:
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Title 31 §5330 - Defines who must be licensed as a money transmitter.
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Title 18 §1960 - Criminalizes operating without a license.
The coalition points out that FinCEN's 2019 guidance explicitly states that non-custodial software developers, who do not take possession of user funds, do not qualify as money transmitters. However, the DOJ's recent actions suggest that it views these definitions as irrelevant, leading to a potential legal minefield for developers.
Implications for Developers
The implications of the DOJ's stance are profound:
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Legal Risks: Developers could face felony charges for merely publishing or maintaining software that facilitates transactions without ever controlling user funds.
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Chilling Effect: The fear of prosecution may deter developers from creating or sharing open-source code, which is essential for innovation in the blockchain space.
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Regulatory Clarity Needed: The coalition is calling for Congress to clarify the law to align with FinCEN's guidance, ensuring that developers can operate without the threat of criminal liability.
The Call to Action
The letter concludes with a strong appeal for Congress to urge the DOJ to correct its misapplication of the law. By revising the interpretation of money transmission laws, Congress can help foster a more supportive environment for cryptocurrency innovation in the United States.
As the debate continues, the future of digital currencies and blockchain technology in the U.S. hangs in the balance, with significant implications for the industry and its stakeholders.
Sources
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Crypto urges Congress to change DOJ rule used against Tornado Cash devs, Cointelegraph.
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Crypto Calls On Congress To Revise DOJ Rule Targeting Tornado Cash Developers, menafn.
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Crypto firms urge Congress to rein in DOJ’s interpretation of money transmission laws, CryptoSlate.
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