DOJ Provides Legal Clarity for Truly Decentralized Crypto Software

The U.S. Department of Justice (DOJ) has issued a significant policy clarification regarding the prosecution of providers of truly decentralized software, offering much-needed legal certainty to the blockchain and cryptocurrency development community. In a speech delivered by Acting Assistant Attorney General Matt Galeotti at Jackson Hole, the DOJ outlined specific conditions under which such entities would not face criminal charges under 18 U.S.C. 1960(b)(1)(c), a statute typically used in financial crimes enforcement [1].

According to Galeotti, the DOJ will not pursue new charges against third parties that meet all of the following criteria: the software is demonstrably “truly decentralized”; transactions are automated and peer-to-peer; and no third party maintains custody or control over user assets. This approach represents a more refined understanding of blockchain’s structural distinctions, particularly between centralized and decentralized models [1].

The announcement is widely seen as a response to the high-profile prosecution of Roman Storm, the founder of Tornado Cash, a decentralized cryptocurrency mixer. While Tornado Cash was used for illicit activities, the DOJ’s new guidance suggests that if a similar tool were fully decentralized with no central control, its developers might not face the same legal consequences. This distinction underscores the growing recognition of the technical and operational nuances of blockchain-based systems [1].

For the crypto industry, this clarity is a crucial step forward. Developers have long operated under a cloud of legal uncertainty, which has at times deterred innovation and pushed talent abroad. Galeotti emphasized that “well-intentioned innovators do not have to fear for their liberty,” signaling a supportive stance for those building open, permissionless financial systems within the U.S. [1]. This shift may encourage more domestic development and position the U.S. as a leader in blockchain innovation.

The DOJ’s statement applies specifically to 1960(b)(1)(c) and under defined conditions. It does not negate the existence of other regulatory frameworks. Nonetheless, it marks a significant movement toward a more predictable legal environment for decentralized technologies. As government agencies begin to more accurately grasp the nature of decentralized systems, such policy updates are likely to follow in other regulatory domains.

This development highlights a broader trend of institutional adaptation to the complexities of blockchain and decentralized finance. The DOJ’s action demonstrates that regulatory clarity does not necessarily stifle innovation but can, in fact, enable it by reducing unnecessary legal risks. It also reinforces the importance of technical design—particularly in terms of decentralization and custody—in shaping legal outcomes for blockchain projects.

Source: [1] Decentralized Software: US DOJ Delivers Crucial Clarity on Prosecution Stance (https://coinmarketcap.com/community/articles/68a76925599ac07a8d597cb9/)