A coalition of cryptocurrency companies has urged Congress to pressure the Department of Justice to revise an “unprecedented and excessively broad” interpretation of laws that were utilized to indict the creators of the crypto mixer Tornado Cash.
A letter dated March 26 signed by 34 cryptocurrency organizations and advocacy groups submitted to the Senate Banking Committee, House Financial Services Committee, and both judiciary committees stated that the DOJ’s interpretation of unlicensed money-transmitting businesses implies that “almost every blockchain developer could face criminal prosecution.”
The correspondence — spearheaded by the DeFi Education Fund and supported by major firms such as Kraken and Coinbase — emphasized that the Justice Department’s viewpoint “generates confusion and uncertainty” and “endangers the sustainability of U.S.-based software development in the digital asset sector.”
The coalition indicated that the DOJ revealed its stance “in August 2023 through criminal charges” — the same timeframe it implicated Tornado Cash creators Roman Storm and Roman Semenov with money laundering activities.
Storm has been released on bail, has entered a not guilty plea, and seeks to have the charges dismissed. Semenov, a citizen of Russia, remains at large.
Source: DeFi Education Fund
The DOJ has brought similar allegations against Samourai Wallet co-founders Keonne Rodriguez and William Lonergan Hill, both of whom have pleaded not guilty.
The crypto coalition’s letter asserted that two specific sections of the US Code outline a “money transmitting business” — Title 31 section 5330, which delineates who is required to be licensed, and Title 18 section 1960, which criminalizes the operation of unlicensed entities.
It mentioned that guidance provided in 2019 by the Treasury’s Financial Crimes Enforcement Network (FinCEN) offered illustrations of what constitutes money-transmitting activities and indicated that “if a software developer never assumes possession or control over customer funds, that developer is not engaged in a ‘money transmitting business.’”
The letter contended that the DOJ had adopted a stance that the definition of a money transmitting business under section 5330 “is not pertinent to assessing whether someone is conducting an unlicensed ‘money transmitting business’ under Section 1960,” despite the “deliberate similarity” in both sections and FinCEN’s guidelines.
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The coalition accused the DOJ of disregarding both FinCEN’s guidelines and certain sections of the law to pursue its interpretation of a money-transmitting business in the case against Storm and Semenov.
They claimed that this resulted in “two distinct US government agencies holding conflicting interpretations of ‘money transmission’ — presenting an unclear and unfair scenario for law-abiding industry stakeholders and innovators.”
The letter warned that if unaddressed, the Justice Department’s interpretation would place non-custodial software developers “within the scope of U.S. criminal liability.”
“The ensuing, and entirely reasonable, anxiety among developers could effectively halt the advancement of these technologies within the United States.”
In January, Michael Lewellen, a member of the cryptocurrency advocacy organization Coin Center, sued Attorney General Merrick Garland seeking to have his planned launch of non-custodial software deemed legal and to prevent the DOJ from applying money transmitting laws to prosecute him.
Lewellen stated that the DOJ “has initiated criminal prosecution against individuals for publishing analogous cryptocurrency software,” which he argues extends the interpretation of money-transmitting laws “beyond what the Constitution permits.”
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