Over 30 crypto firms, led by the DeFi Education Fund, are urging Congress to address the Department of Justice’s interpretation of money transmitter laws, which they say could expose non-custodial software developers to criminal liability. In a letter sent to key lawmakers, including Senate Banking Committee Chairman Tim Scott and House Judiciary Committee Chairman Jim Jordan, the industry argues that the DOJ’s stance on Section 1960—first introduced in an August 2023 indictment — deviates from existing Treasury Department guidance. The signatories, including Coinbase , Paradigm, and Kraken , claim that the interpretation disregards the Financial Crimes Enforcement Network’s 2019 guidelines, which state that developers who do not take custody of user funds are not money transmitters. “The DOJ’s new policy position…creates confusion and ambiguity with the spectre of criminal liability,” the letter states. “Essentially, every blockchain developer could be prosecuted as a criminal.” You might also like: Hyperliquid removes JELLY amid market manipulation accusations, promises refunds Crypto’s ‘unlicensed’ money transmitter businesses Section 1960 of the U.S. Code criminalizes the operation of an “unlicensed money transmitting business.” However, crypto firms argue that this should apply only to custodial services that actually hold and transfer user funds, not non-custodial software providers. Courts have historically referenced FinCEN’s regulations to determine compliance, but the DOJ’s recent legal actions — such as those against Tornado Cash developers — suggest a broader interpretation that could lead to more prosecutions. The letter warns that unless Congress intervenes, U.S. crypto innovation could be stifled, pushing developers overseas. “The federal government should not be playing a game of bait and switch,” the letter reads. “Congress should urge the DOJ to correct its misapplication of the law, and clarify Section 1960 to more clearly convey Congress’s intent.” You might also like: Revolut launches mobile crypto app for U.K. and EEA users
