A group of 34 cryptocurrency companies and advocacy organizations has urged Congress to address what they consider an overly broad legal interpretation by the Department of Justice (DOJ), which they argue could have serious consequences for blockchain developers.

In a letter dated March 26 and directed to key members of the Senate Banking Committee, House Financial Services Committee, and judiciary committees in both chambers, major industry players—including Kraken, Coinbase, and the Blockchain Association—express concerns that the DOJ’s stance on unlicensed money-transmitting businesses may hinder innovation in the US digital asset sector.‍

The Central Concern

The DOJ’s perspective arises from its application of money-transmitting laws in prosecuting developers of Tornado Cash, a crypto mixer. The department asserts that writing and deploying blockchain code could qualify as operating an unlicensed money-transmitting business under 18 USC 1960, a law designed to combat illicit financial transactions.

However, the letter argues that this interpretation significantly departs from historical applications. The signatories warn that such an approach could result in “nearly every blockchain developer facing potential criminal charges.”

A key issue is the definition of a “money transmitting business,” which appears in both the Bank Secrecy Act (BSA) and federal criminal statutes. Historically, the crypto industry has relied on guidance from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which clarifies that software developers who do not hold customer funds are not considered money transmitters.

Yet, according to the letter, the DOJ has disregarded this longstanding distinction. “The outcome is two conflicting interpretations of ‘money transmission’ by separate US government agencies, creating uncertainty for law-abiding participants and innovators,” the letter states.‍

Potential Impact on US Innovation

The letter warns that if the DOJ’s aggressive stance remains unchecked, it could discourage blockchain innovation and drive developers to relocate abroad. The signatories highlight that without clear legal boundaries, creators of non-custodial software could face unjust criminal liability.

Senators Cynthia Lummis (R-WY) and Ron Wyden (D-OR) have previously raised similar concerns, noting in a May 2024 letter to Attorney General Merrick Garland that the DOJ’s stance “contradicts the clear, well-established definition of ‘money transmission’ outlined by FinCEN.”‍

Call for Congressional Action

The letter urges Congress to intervene and ensure that Section 1960 aligns with legislative intent and existing regulatory guidance. It warns that allowing the DOJ’s interpretation to prevail could have a chilling effect on blockchain development in the US, leading to an exodus of talent and innovation.

“The federal government should not be engaging in regulatory ambiguity,” the letter asserts. “Congress should press the DOJ to correct its misinterpretation of the law and clarify Section 1960 in line with its intended purpose.”

Among the notable signatories are venture firms A16z Crypto, Paradigm, and Multicoin Capital, along with blockchain organizations such as Uniswap Labs, Ledger, and the Filecoin Foundation.