- 34 crypto firms urge Congress to challenge DOJ’s interpretation of money-transmitting laws to protect blockchain developers.
- DOJ’s stance on Tornado Cash developers could put U.S. blockchain innovation at risk, say crypto industry leaders.
- Tornado Cash case sparks fears of criminal liability for U.S. software developers, risking global tech competitiveness.
A coalition of crypto firms has sent a letter to Congress urging lawmakers to press the Department of Justice (DOJ) to reconsider its interpretation of money-transmitting laws. This request follows the DOJ’s actions against the developers of Tornado Cash, a decentralized crypto mixer. The letter, signed by 34 crypto companies and advocacy groups, argues that the current stance could put blockchain developers at risk of criminal prosecution.
Concern Over DOJ’s Interpretation of Laws
The crypto firms have expressed their concern over the DoJ in relation to the laws of money-transmitting businesses. The letter expresses that according to DOJ’s interpretation, almost all of the blockchain developers are potentially criminally liable.
Subsequently, these concerns are mainly focused around the money-transmitting rules that has been applied by the DOJ, especially in the Tornado Cash developers case.
This letter concurs with the notion that much confusion has been created through application of the status by the DOJ. It points out that the broad understanding of the wording may jeopardise the feasibility of software developers present in the United States in the digital asset market.
The firms focused that the DOJ’s actions was anticompetitive and would stifle innovation and software development in the United States. The letter was written on March 26 addressed to the members of the senate and house committees of banking, housing and urban affair, and financial services.
The Case Against Tornado Cash Developers
The disputed activity of money-transmitting laws was popularized when the DOJ arrested Tornado Cash developers Roman Storm and Roman Semenov for money laundering in August 2023. The charges came after Tornado Cash was first sanctioned by the Treasury Department in 2022 over alleged participation in money laundering for North Korean hackers.
As for Roman Storm, he was released on bail and has entered a plea of not guilty and is also seeking an acquittal of the charges. Another Russian national, Roman Semenov, continues to be on the run. These developments have raised concern in the cryptocommunity, especially among the software developers due to this risk of facing the law.
The actions taken by the DOJ with regards to the developers of Tornado Cash which is a software that obscures cryptocurrency transactions prompts some legal questions. Some have claimed that it was a sign of a problem with how the US government approaches regulating decentralized technologies.
Legal Framework in Question
The letter from the crypto industry group highlights two sections of the U.S. Code that outline what is considered a “money transmitting business.” Section 5330 of title 31 provides for the licensing of such businesses while section 1960 of title 18 makes it unlawful to operate an unlicensed business.
Consequently, the crypto firms have noted that the DOJ has assumed a stance that is contrary to the one that was given by FinCEN back in 2019. This guidance made a clear stand that a software developer who doesn’t hold customer funds is not in the business of transmitting money.
Crypto firms insist that DOJ’s approach is inconsistent with the law and the guidance issued by FinCEN. They feel that the approach taken by the DOJ could lead to a scenario where a federal agency will interpret the law in a way that is different from another federal agency. This causes uncertainty for developers as they are in a blurred legal territory of what they are allowed to do.
Potential Consequences for U.S. Software Development
The group’s letter emphasises that, if addressed and left unchallenged, the DOJ’s interpretation threatens to constrict the creation of non-custodial software technologies in the United States. This could make developers leave their projects, either moving to another country where they will not be prosecuted, or simply stop with the development. They have also said that this would be a disincentive to the growth of the digital asset industry and a discouragement to further innovations in blockchain technology.
On the same account, the question is not only related to Tornado Cash. Other such charges have also been laid against the co-creators of Samourai Wallet, a cryptographic money wallet that is centered around privacy.
The two accused persons include Keonne Rodriguez and William Lonergan Hill and they have both pleaded not guilty to the charges that were laid against them, failing to operate an unlicensed money-transmitting business.
