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A senior official from the United States Justice Department (DOJ) has stirred up discussions regarding cryptocurrency regulation. The official indicated that the department intends to refrain from prosecuting developers of blockchain software who lack any criminal intent. This announcement has predictably elicited a range of responses across the cryptocurrency community.
Key Takeaways
- The Justice Department has affirmed that blockchain developers building decentralized, non-custodial platforms will not be prosecuted.
- Galeotti stated the DOJ’s intentions to avoid using indictments as a substitute for official cryptocurrency legislation or regulatory frameworks.
- This announcement follows the recent conviction of Roman Storm, a developer associated with Tornado Cash.
- Industry leaders have welcomed this decision, recognizing it as a positive step for both cryptocurrency innovation and decentralized finance initiatives.
DOJ Restricts Application of 1960(b)(1)(C) to Blockchain Developers
Matthew Galeotti, who is currently the acting head of the DOJ’s criminal division, provided these insights during a meeting with cryptocurrency advocacy groups and key industry figures at an event hosted by the American Innovation Project. At the policy summit on Thursday held in Jackson Hole, Wyoming, Galeotti clarified that the 1960(b)(1)(C) statute will no longer be employed against developers involved in blockchain technology.
According to U.S. Code 1960(b)(1)(C), it is illegal for unlicensed money transmitting businesses to engage in transactions connected to criminal or other illegal activities. Those found in violation of this code can face penalties of up to five years in federal prison.
The department aims to avoid utilizing federal criminal laws to create de facto regulatory oversight of the digital asset sector. We will not leverage indictments as a means of policy creation. Innovators should not be left speculating on what actions might lead to criminal charges.
Galeotti
Notably, a court in Manhattan recently declared Tornado Cash developer Roman Storm guilty of operating an illicit money transmitting service, therefore breaching the 1960(b)(1)(C) code.
Clarification of New Policy Amid Tornado Cash Case
Galeotti explained that charges under 1960(b)(1)(C) will not be implemented given the following conditions:
- If the blockchain software demonstrates true decentralization, possessing no central operator or controlling entity.
- Furthermore, if it merely automates transactions between individuals directly (peer-to-peer interactions).
- And when no third party maintains custody or control over the digital assets of users.
DOJ representatives added, however, that “other charges may be deemed appropriate” if signs of malicious intent are evident in specific circumstances.
Galeotti noted that the updated policy would be enacted immediately, whilst also addressing Storm’s recent conviction on identical charges. In 2021, Roman Storm was arrested and faced accusations which include conspiracy to commit money laundering and violations of sanctions.
Predominantly, these purported actions were connected to his position at Tornado Cash; an open-source cryptocurrency mixing service that enables users to conduct private transactions on the blockchain.
Following the change in presidential administration at the start of the year, legal proceedings against Storm have continued. However, several charges were dismissed in line with a DOJ memo published in April that instructed federal prosecutors to discontinue the majority of cryptocurrency-related accusations.
Despite this, the state continued to pursue accusations centered on Storm’s alleged awareness of Tornado Cash users who engaged in unlawful transactions tied to illicit activities.
Cryptocurrency Leaders Applaud Policy Revision but Voice Concerns over Timing and Storm Case
Lobbyists for blockchain technology, along with key industry stakeholders, expressed their approval of Galeotti’s comments at the conference in Wyoming. However, some voiced lingering concerns regarding the timing of the policy revision. Amanda Tuminelli, the executive director of the DeFi Education Fund, conveyed her satisfaction with the policy changes, recognizing the role of the current administration in addressing issues related to “Section 1960.”
Peter Van Valkenburg, Executive Director of Coin Center, acknowledged Galeotti’s statements but mentioned that the policy change appeared “somewhat belated,” specifically in the context of Storm’s case. Even with the pro-cryptocurrency stances of the current administration, figures involved with decentralized finance and advocates for privacy have raised issues surrounding both the prosecution and the guilty verdict for Storm by the DOJ.
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James Godstime is a crypto journalist and market analyst with over three years of experience in crypto, Web3, and finance. He simplifies complex and technical ideas to engage readers. Outside of work, he enjoys football and tennis, which he follows passionately.
DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.