Over 30 cryptocurrency companies, spearheaded by the DeFi Education Fund, are calling on Congress to reconsider the Department of Justice’s interpretation of money transmitter laws, asserting that it poses potential criminal liability for non-custodial software developers.
In a recent letter addressed to influential lawmakers, including the Chair of the Senate Banking Committee and the Chair of the House Judiciary Committee, the industry contends that the DOJ’s interpretation of Section 1960—arising from an indictment issued in August 2023—differs significantly from established guidance provided by the Treasury Department.
The letter’s signatories, which include prominent names in the crypto sector, argue that this interpretation ignores the Financial Crimes Enforcement Network’s 2019 guidelines, which clarify that developers who do not maintain custody of user funds should not be classified as money transmitters.
“The DOJ’s revised policy creates significant confusion and ambiguity, raising the risk of potential criminal liability for developers,” the letter emphasizes. “This situation could lead to the prosecution of every blockchain developer as a criminal.”
Concerns Over ‘Unlicensed’ Money Transmitter Businesses
Section 1960 of the U.S. Code criminalizes the operation of an “unlicensed money transmitting business,” but crypto firms argue that this designation should be reserved for custodial services that actively hold and move user funds, not for non-custodial technology providers.
Historically, courts have relied on FinCEN’s regulations to assess compliance. However, the DOJ’s recent legal pursuits—such as actions taken against certain developers—indicate a potentially expanded interpretation that may lead to increased prosecutions.
The letter cautions that without Congressional action, the future of U.S. cryptocurrency innovation may be jeopardized, forcing developers to relocate abroad.
“The federal government should not engage in contradictory practices,” the letter states. “Congress must urge the DOJ to rectify its misinterpretation of the law and clarify Section 1960 to properly reflect Congress’s original intent.”
