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- Crypto firms urge Congress to stop the DOJ’s broad interpretation of money transmission laws.
- The new DOJ stance could criminalize blockchain developers unfairly.
- Industry leaders warn this move may push innovation out of the U.S.
A coalition of cryptocurrency firms has asked Congress to take action against the Department of Justice (DOJ). The dispute centers on how the DOJ interprets money transmission laws. Crypto firms believe the agency is overreaching in a way that could unfairly criminalize software developers.
The row started when the DOJ indicted developers of the crypto mixing platform Tornado Cash on the grounds they ran an unlicensed money transmitting business. According to prosecutors, they operated such a business. Industry insiders argue that regulators should not view software developers as financial service providers.
The legal definition of a “money-transmitting business” has remained the same over the years. It applies to entities that receive and transmit money for other people.According to this definition, regulators must oversee only businesses that directly control funds.
The FinCEN reaffirmed the interpretation in 2019 with explicit guidance that non-custodial software is not money transmission. The DOJ claims it may prosecute software developers even if they never control the user’s money.
Proponents of crypto say the new interpretation goes against existing laws and congressional intent. The alliance believes it places unnecessary legal risk on blockchain developers and threatens the future of digital asset innovation.
Developers Face Uncertain Future
Industry executives warn that the DOJ’s stance would have disastrous effects on software development. It would be a crime for any blockchain developer if they just created software to facilitate transactions.
This would have a dampening effect on innovation. Developers would be afraid to create blockchain-based applications in the event they face legal action against them. Many companies would migrate overseas, and the U.S. would be compromised in the global crypto market. Startups and big technology firms both rely on transparent regulations in order to be able to conduct business securely.
Lacking regulatory guidance, the threat of criminal prosecution may halt development in the sector in its tracks. Lawyers add the DOJ reading may be applied to other areas of technology. If blockchain developers are subject to criminal prosecution for writing code, the same legal attention may be applied to other technology sectors. That would be a concerning precedent, stifling innovation in multiple sectors.
Clarifying Crypto Regulations
The alliance is urging the legislature to act to rectify the interpretation made by the DOJ. The coalition urges legislators to clarify money transmission laws to prevent unjustified prosecutions against software developers. If lawmakers fail to act, the industry warns of dire consequences.
Congress has always realized the need for clear crypto regulations. Senators Ron Wyden and Cynthia Lummis have emphasized the need for control of funds within the definition of money transmission. They align with FinCEN guidance and industry understanding.
If the U.S. Congress does not act on it, the uncertainty will push crypto innovation offshore. Developers, investors, and companies need clarity in order to advance without the threat of persecution. The crypto community feels reasonable regulation is necessary in order to expand. The answer to the debate will decide the future of digital money in the country.
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