A group of 34 crypto companies and advocacy organizations has written to Congress committees on banking and the judiciary.
In the letter, the group led by DeFi Education Fund asked the legislators to correct the Department of Justice (DOJ) interpretation of unlicensed money-transmitting businesses.
Under the current interpretation by the DOJ, software developers are also included as unlicensed money-transmitting businesses under the US criminal code provisions. The DOJ first applied the interpretation in an indictment in 2023.
However, the group noted that such an interpretation creates ambiguity and confusion, and the risk of criminal liability is a major threat to software development in the US. They noted that this interpretation could most impact blockchain developers.
Source: DeFi Education Fund
The letter reads:
Based on this, the group has called on legislators to address the issue by persuading the DOJ to correct the error. They noted that it exposes any developer of noncustodial software to the risk of criminal liability in the US, which could force many developers and innovators to leave the US.
The letter was addressed to the Chairs and Ranking members of the Senate Committee on Banking, the Senate Committee on Judiciary, the House Committee on Financial Services, and the House Committee on Judiciary.
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Some firms that signed the letter included digital asset managers Paradigm, a16z Crypto, Dragonfly, Jump Crypto, and Digital Currency Group. Leading exchanges, including Kraken, Coinbase, and Crypto.com, as well as developers like Polygon Labs, Jito Labs, Uniswap Labs, and dYdX Trading Inc., were also co-signatories.
Unsurprisingly, wallet makers Consensys and Ledger signed, as did other crypto advocacy associations such as the Decentralization Research Center, Blockchain Association, and Crypto Council for Innovation.
Crypto group critique DOJ misapplication of law
A major part of the letter focused on explaining why the DOJ’s interpretation is wrong. According to the letter, the criminal code and the Bank Secrecy Act’s licensing requirements are the only two places in the US code where “money transmitting business” is used, and both laws define it similarly.
It added that the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has also issued guidance in 2019 on what constitutes a money-transmitting business, and this guidance specifically excludes developers of noncustodial platforms.
Therefore, the DOJ’s decision to ignore such guidance and choose to make a person who is not recognized under the law as a money transmitter liable for unlicensed money transmission is illogical.
It said:
Meanwhile, it is too early to tell what impact the letter could have on reversing the current interpretation. So far, the crypto industry has been able to get several government agencies to reverse several of the anti-crypto rules made during the last administration and this could continue that trend.
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Most recently, the Federal Deposit Insurance Corp issued a crypto policy that reverses its previous position on banks engaging in crypto activities. Under the new policy, banks no longer need to get the approval of the FDIC before getting involved in crypto.
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