Syed Rahman and Ulrich Schmidt explain the latest sign that the United States has altered its approach to crypto enforcement.
The United States’ Department of Justice (DOJ) has said that it will not target software developers who create decentralised platforms for transmitting cryptocurrencies without criminal intent.
In what can be viewed as another indicator of the US government's increasingly favourable view of the crypto sector, acting Assistant Attorney General Matthew Galeotti of the DOJ's criminal division said the department will move away from bringing charges over failure to register as a money transmitter business.
As an explanation, he said “Our view is that merely writing code, without ill-intent, is not a crime.’’
While money transmitters, such as Western Union, face obligations relating to customer vetting and reporting suspicious activity to prevent money laundering, this has become a problem for the crypto sector. Decentralised exchanges have argued that they have little or no scope for overseeing transactions on their platforms. The issue was touched on a matter of weeks ago, when a jury found co-founder of Tornado Cash, Roman Storm, guilty of a conspiracy to operate an unlicensed money transmitting business.
Dirty Money
Those looking to tackle corruption say that firms such as Tornado Cash can make it simpler for people to launder dirty money, whereas Storm’s supporters argued that he was only the creator of computer code rather than a criminal.
The comments from the DOJ show that the department has come down on the side of the latter argument. This is not surprising, as Storm’s case originated from the time of Joe Biden’s presidency. The subsequent Donald Trump administration has shown itself increasingly keen to give greater leeway to the crypto sector – a move coinciding with the president’s family increasingly looking to make financial gains in the crypto sector.
The DOJ has disbanded its crypto enforcement team and the US Securities and Exchange Commission has now dropped various cases that involved crypto companies and their executives.
Welcomed
This latest announcement from the DOJ was warmly welcomed by the crypto industry. It has provided clarity on the legal responsibilities of developers in the industry. One could argue that the decision will encourage innovation by removing the deterrent effect of prosecution. It could also be argued that the response from key industry players confirms that this strategy will work.
However, cases involving decentralised platform software are extremely complex. The traditional legal prosecution is centred around the idea of a responsible party for an event - and decentralised software is putting this notion to the test. It will be interesting to see how these ideas are considered and analysed in the future, if losses go uncompensated and problems related to this develop.
