Crypto Firms Urge Congress to Challenge DOJ's Money Transmitting Interpretation

A coalition of 34 crypto firms and advocate groups has called on Congress to pressure the Department of Justice (DOJ) to revise its interpretation of laws related to unlicensed money-transmitting businesses. This interpretation was used to charge the developers of the crypto mixer Tornado Cash, and the coalition argues that it is overly broad and creates significant confusion and ambiguity for blockchain developers.

The letter, sent to key congressional committees, including the Senate Banking Committee and the House Financial Services Committee, asserts that the DOJ's stance could potentially criminalize "essentially every blockchain developer." The coalition, led by the DeFi Education Fund and including prominent firms like Kraken and Coinbase, warns that this interpretation threatens the viability of U.S.-based software development in the digital asset industry.

The DOJ's position was first articulated in August 2023 when it charged Tornado Cash developers Roman Storm and Roman Semenov with money laundering. Storm has since been released on bail and has pleaded not guilty, while Semenov, a Russian national, remains at large. The DOJ has also filed similar charges against the co-founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, both of whom have pleaded not guilty.

The coalition's letter argues that the DOJ's interpretation of a "money transmitting business" under Title 18 section 1960 of the US Code is at odds with guidance from the Treasury’s Financial Crimes Enforcement Network (FinCEN). FinCEN's 2019 guidance stated that if a software developer never obtains possession or control over customer funds, they are not operating a "money transmitting business." The coalition contends that the DOJ is ignoring this guidance and parts of the law to pursue its own interpretation, leading to conflicting views within the U.S. government on what constitutes money transmission.

The letter further argues that the DOJ's actions have created an unclear and unfair position for law-abiding industry participants and innovators. The coalition fears that if this interpretation is not addressed, non-custodial software developers within the reach of U.S. law could face criminal liability, effectively ending the development of these technologies in the United States due to the fear of legal repercussions.

In January, Michael Lewellen, a fellow of the crypto advocacy group Coin Center, sued Attorney General Merrick Garland to have his planned release of non-custodial software declared legal. Lewellen claims that the DOJ's interpretation of money-transmitting laws extends beyond what the Constitution allows and has begun criminally prosecuting people for publishing similar cryptocurrency software.

The crypto industry's call for regulatory clarity comes at a critical juncture, as the sector faces increasing scrutiny from law enforcement agencies. The DOJ's actions against Tornado Cash developers have raised concerns about potential overreach and the need for clearer guidelines. The coalition hopes that Congress will address these concerns and work towards creating a regulatory environment that supports innovation while addressing legitimate concerns about illicit activities.