Crypto firms urge Congress to rein in DOJs interpretation of money transmission laws
A coalition of 34 crypto industry organizations has sent a joint letter to congressional leaders urging them to address the Department of Justices (DOJ) unprecedented and overly expansive interpretation of the federal statute governing unlicensed money transmission.
The letter, signed by firms including Coinbase, Kraken, Uniswap Labs, Ledger, Consensys, Paradigm, and the DeFi Education Fund, focuses on the DOJs recent application of 18 U.S.C. §1960 to software developers.
The DOJs interpretation first emerged in the August 2023 criminal indictment of Tornado Cash developer Roman Storm. Prosecutors charged the open-source developer under Section 1960, which criminalizes operating an unlicensed money transmitting business.
According to the signatories, this marked a departure from a long-standing understanding of the law and deviated from guidance issued by the Financial Crimes Enforcement Network (FinCEN), the US Treasury bureau tasked with enforcing the Bank Secrecy Act (BSA).
DOJ interpretation conflicts with FinCEN guidance
At the center of the dispute is the statutory definition of money transmitting business, which appears in 31 U.S.C. §5330, which governs licensing under the BSA, and 18 U.S.C. §1960, which criminalizes operating without such a license.
Both statutes define money transmission as transferring funds on behalf of the public by any and all means, and FinCENs 2019 guidance states that non-custodial software developersthose who never take possession or control of user fundsdo not fall under this category.
The letter argued that the DOJ is ignoring this guidance and asserting that §5330s definition of a money-transmitting business is irrelevant when interpreting Section 1960.
This creates conflicting standards between FinCEN and the DOJ and places developers at legal risk for merely publishing or maintaining non-custodial blockchain applications.
Additionally, developers building DeFi applications, non-custodial wallets, and other blockchain-based tools could be subject to felony prosecution despite not having control over users assets.
They emphasize that transferring funds on behalf of another party requires actual possession and control of the funds in question. Without that custody element, the activity should not constitute money transmission.
The organizations warn that unless the DOJ revises its stance or Congress intervenes, the result could be a chilling effect on open-source development in the US, as developers may avoid publishing code that could be interpreted as facilitating money transmission.
The letter then concludes by calling on Congress to urge the DOJ to correct its misapplication of the law and clarify Section 1960 to more clearly convey Congresss intent.
The post Crypto firms urge Congress to rein in DOJs interpretation of money transmission laws appeared first on CryptoSlate.
Text source: CryptoSlate
