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Cryptocurrency Developers Fight Back Against DOJ’s Money Transmission Stance

CoineditionCoinedition2024/05/14 12:01
By:Coin Edition
  • DOJ’s interpretation of money transmission extends to non-custodial crypto software, challenging industry norms.
  • FinCEN’s historical guidance supports non-custodial services, emphasizing asset custody distinctions.
  • Critics argue DOJ’s stance lacks coherence, as cryptocurrency ownership remains with users, not service providers.

The recent policy arguments put forth by the U.S. Department of Justice (DOJ) regarding the scope of Federal prohibition on operating an unlicensed money transmitting business have sparked significant concerns. 

The cryptocurrency community has expressed concern over the DOJ’s interpretation, particularly its application to non-custodial crypto asset software services. This interpretation seems to diverge from both the original intent of Congress and established guidance from FinCEN , the Department of the Treasury’s Financial Crimes Enforcement Network.

A key point of disagreement centers on how “money transmission” is defined in applicable laws and regulations. While the DOJ’s position suggests that any interaction with cryptocurrency, including non-custodial involvement, might qualify as money transmission, advocates of non-custodial services present a contrasting view. They stress that direct receipt and control of assets are essential requirements for money transmission, elements not present in non-custodial services.

Furthermore, FinCEN’s historical guidance aligns with the interpretation that non-custodial crypto asset software does not fall under the purview of money transmitting business registration requirements. 

Dating back over a decade, this guidance underscores the differentiation between custodial and non-custodial services, exempting the latter from registration requirements. Recent clarifications from FinCEN further support this stance, underscoring the significance of factors like asset custody and control.

Critics of the DOJ’s interpretation argue that it not only contradicts FinCEN’s guidance but also lacks logical coherence. They contend that ownership and control of cryptocurrency assets remain with users at all times, even during transactions facilitated by non-custodial software. Analogies drawn by the DOJ to other forms of transmission, such as heat or data transfer, fail to grasp the unique nature of cryptocurrency transactions and ownership.

As these concerns mount, there is an increasing call for the DOJ to review its understanding of Section 1960. Advocates of non-custodial crypto asset software stress the importance of fostering innovation and maintaining confidence in the legal system. They contend that holding non-custodial software developers accountable for potential criminal charges wouldn’t only hinder innovation but also diminish confidence in the regulatory structure governing cryptocurrencies.

Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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