Regulation
US senators criticize DOJ stance on non-custodial crypto services
Senators Ron Wyden and Cynthia Lummis have expressed serious concerns about current crypto regulations in the United States. They target the Department of Justice’s (DOJ) recent stance on non-custodial crypto asset software services.
In a letter to Attorney General Merrick Garland, they say the DOJ’s interpretation of federal laws threatens to criminalize Americans providing these services.
Senators criticize DOJ stance on non-custodial crypto services
The senators assert that DOJ’s unprecedented interpretation Prohibiting the operation of an unlicensed money transmitting business contradicts Congressional intent. They also note that this conflicts with guidelines established by the Financial Crimes Enforcement Network (FinCEN).
They warn that this interpretation could stifle innovation in the crypto industry. It could also undermine confidence in the rule of law.
Both senators explain that non-custodial crypto services allow users to maintain sole possession and control of their crypto assets. This means that service providers do not “accept” or control them. Transactions take place on the user’s device without third-party access.
Learn more: What is a non-custodial wallet?
Consistent with the senators’ explanation, FinCEN has determined that non-custodial services are not subject to money transmitter registration requirements. This is because they do not involve the direct receipt and control of assets.
“Non-custodial crypto service providers cannot be classified as money transmitting businesses because users of these services retain sole possession and control of their crypto assets. At no time when operating or providing non-custodial services do these service providers “accept” crypto assets from their users. Users retain sole custody and control of the private keys of their crypto assets. All transactions are signed and processed on the user’s local device without third-party access,” the letter bed.
Additionally, the letter urges the DOJ “to abandon this misinterpretation of Section 1960” to support the rule of law and foster the development of transformative technologies. In addition to her letter, Senator Lummis shared her thoughts on her X (Twitter) account.
“President Biden’s Department of Justice rolling over the long-standing interpretation of FinCEN is legally flawed and threatens to criminalize Bitcoin software development in America,” said Senator Lummis. wrote.
Although the letter does not name any specific crypto services, many interpret it as referring to the recent case with Samourai Wallet. This platform is a Bitcoin wallet which offers financial anonymity to its users.
BeInCrypto reported that the The DOJ indicted the co-founders of Samourai Wallet with several financial crimes. These fees include operating an unlicensed money transfer business.
Following this accusation, US authorities arrested the co-founders of Samourai Wallet. They also seized the platform’s operational infrastructure and removed its app from Google’s Play Store in the United States.
THE The DOJ has already charged Tornado Cash, a decentralized crypto mixer based on Ethereum, with a similar claim. In August 2022, the Office of Foreign Assets Control (OFAC) sanctioned the crypto mixing service. At the time, OFAC claimed that Tornado Cash had been involved in laundering funds worth $7 billion.
Learn more: Top 7 Tornado Cash Alternatives in 2024
Following OFAC sanctionthe Netherlands Crime Agency (FIOD) Tornado Cash developer Alexey Pertsev arrested in Amsterdam the same month. FIOD alleged that Pertsev sponsored illicit financial flows, money laundering and cryptocurrency mixing through the service.
According to the program, Pertsev will hear his verdict today. The crypto community is eagerly awaiting the outcome of the Tornado Cash case. They fear the outcome could threaten privacy-focused software developers within the ecosystem.
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