Recently, two US lawmakers, Senators Cynthia Lummis and Ron Wyden, have come out in opposition to the Department of Justice’s attempt to broaden the definition of a money-transmitting business. In a letter addressed to US Attorney General Merrick Garland, the lawmakers expressed concerns that the DOJ’s expansive interpretation could potentially criminalize non-custodial crypto asset software services. They argued that this move goes against the clear intent of Congress and contradicts the guidance provided by the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).
The Department of Justice, in response to a motion for dismissal by Roman Storm, the developer of Tornado Cash, argued that the crypto mixer operated as an unlicensed money transmitter. The DOJ contended that the requirement of controlling funds was not necessary for such classification. According to the Justice Department, the definition of ‘money transmitting’ does not hinge on the transmitter having control over the funds being transferred. Instead, it includes any form of transferring funds on behalf of the public.
Senators Lummis and Wyden, along with citing the Bank Secrecy Act and various FinCEN regulations, believe that the DOJ’s interpretation is misguided. They argue that the law’s original intent was for a company to have direct receipt and control of assets to qualify as a money-transmitting business. By deviating from this requirement, the DOJ risks overstepping its boundaries and potentially stifling innovation in the crypto asset space.
Implications for the Crypto Industry
The Department of Justice’s attempt to expand the definition of a money-transmitting business could have far-reaching implications for the crypto industry. If non-custodial crypto asset software services are deemed to fall under this classification, it could lead to increased regulatory scrutiny and compliance requirements. This, in turn, may deter innovation and investment in this rapidly evolving sector.
The opposition from Senators Cynthia Lummis and Ron Wyden to the Department of Justice’s interpretation of money-transmitting laws highlights the ongoing struggle to balance regulatory oversight with technological advancement. It is crucial for lawmakers and regulators to collaborate with industry stakeholders to ensure that regulations are conducive to innovation while also safeguarding against illicit activities. As the crypto industry continues to flourish, finding the right balance between innovation and regulation will be key to its long-term success.
