Senator Lummis Challenges DOJ’s Interpretation of Non-Custodial Wallet Regulations

    U.S. Senator Cynthia Lummis criticizes the Department of Justice (DOJ) for its interpretation of regulations on non-custodial software wallets, arguing it contradicts past Treasury advice and risks criminalizing core Bitcoin and decentralized finance operations.

    • Senator Lummis contests DOJ’s stance on non-custodial wallets.
    • Coin Center and Peter Van Valkenburgh raise concerns over DOJ’s broad interpretation.
    • DOJ’s position could impact developers and decentralized nature of blockchain.

    Senator Cynthia Lummis challenges the Department of Justice’s recent interpretation of regulations concerning non-custodial software wallets. She asserts that the DOJ’s approach contradicts previous guidance from the Treasury, which viewed such wallets as potential conduits for money transmission activities. Lummis argues that this discrepancy risks undermining the rule of law by potentially criminalizing essential aspects of Bitcoin and decentralized finance operations.

    DOJ’s Stance and Response

    The Department of Justice has consistently viewed the creation and maintenance of platforms like the Bitcoin mixer Samourai Wallet and the Tornado Cash platform as unauthorized money transmission activities. Despite Senator Lummis’ objections, the DOJ maintains its position, leading to criminal charges against developers associated with these platforms.

    Concerns from the Cryptocurrency Community

    Senator Lummis’ criticism echoes concerns voiced by various entities within the cryptocurrency community. Coin Center, a prominent advocate for digital currency and blockchain technology, contends that the DOJ’s interpretation is overly expansive. Peter Van Valkenburgh, Coin Center’s director of research, warns that categorizing every functional cryptocurrency wallet and smart contract as performing money transmission could significantly broaden the scope of money transmission laws.

    Legal Challenges and Potential Impact

    Coin Center has taken proactive measures to challenge the DOJ’s legal interpretations by submitting an amicus brief in support of Roman Storm, the developer of Tornado Cash. They argue that Storm’s actions, primarily code publishing, are protected by the First Amendment’s freedom of speech principle. Beyond specific cases, the consequences of the DOJ’s interpretation extend to broader issues within the cryptocurrency industry, particularly regarding the classification of software developers.

    If developers are deemed money transmitters for creating and distributing technology facilitating digital transactions, it could establish a precedent requiring all developers to obtain licenses as financial operators. This regulatory burden may stifle innovation and deter activity in the cryptocurrency space. Moreover, the widespread application of money transmission laws could compel developers to implement identity verification processes and service limitations, fundamentally altering the decentralized and open nature of blockchain technologies.


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