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DEF published a Coalition Letter on March 26, 2025, co-signed by Paradigm, A16z, Coinbase, and dozens of other crypto-focused companies, addressed to members of Congress, which kindly requests their support obtaining Congressional clarity on Section 1960.
Why? In our collective view, a regulation by criminal indictment approach from the Department of Justice (DOJ) is inconsistent with precedent, and applies an overly expansive interpretation of the criminal code provision regarding operating an “unlicensed money transmitting business,” particularly as it relates to software developers.
"The DeFi Education Fund’s number one policy priority is obtaining Congressional clarity on Section 1960, and we are so incredibly grateful to the broad coalition of crypto industry participants that united to defend the rights of software developers and to push back on the DOJ’s misguided approach of regulation by criminal indictment," said Amanda Tuminelli, Executive Director and Chief Legal Officer of the DeFi Education Fund. "On behalf of the crypto industry, we look forward to meeting with Congressional leaders to emphasize why this issue is of the utmost importance to ensuring the successful future of technology and financial innovation in the United States.”
Read the full text of the letter below, or download the PDF of the letter at the link.
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Dear Members of the Senate Committee on Banking, Senate Committee on the Judiciary, House Committee on Financial Services, and House Committee on the Judiciary:
We write to urge you to correct the Department of Justice’s (DOJ) unprecedented and overly expansive interpretation of the criminal code provision proscribing operating an “unlicensed money transmitting business” as applied to software developers. The DOJ’s new policy position, first debuted in August 2023 via criminal indictment, creates confusion and ambiguity with the spectre of criminal liability, and ultimately threatens the viability of U.S.-based software development in the digital asset industry and other industries. In short, under this interpretation, essentially every blockchain developer could be prosecuted as a criminal.
The term “money transmitting business” is found in two places in the U.S. code: in the Bank Secrecy Act’s licensure requirements and in the criminal code. The definition at 31 U.S.C. 5330 defines who must be licensed as a “money transmitting business,” and 18 U.S.C. 1960 criminalizes operating an “unlicensed money transmitting business.” Section 1960 was meant to be the enforcement mechanism for the BSA and state licensing requirements.
The definition of “money transmitting business” is substantively identical in both statutes, evidencing Congress’s intent to read them similarly. Section 5330 defines a “money transmitting business” to include a “money transmitting service,” which includes “accepting currency, funds, or value that substitutes for currency and transmitting the currency, funds, or value that substitutes for currency by any means.” Under Section 1960(b)(2), the term “money transmitting" means “transferring funds on behalf of the public by any and all means.” Section 5330 is explicitly referenced in Section 1960(b)(1)(B).
The plain meaning of “transfer[] funds on behalf of” another person has always been clear: in order to transfer funds on someone’s behalf, one must have possession of those funds and then relinquish control over them to a third party. The Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) agrees. Since 2019, the digital asset industry has relied on FinCEN Guidance that provided examples of what activities constitute “money transmitting” under the BSA. That Guidance explains that if a software developer never obtains possession or control over customer funds, that developer is not operating a “money transmitting business.” The industry has followed this Guidance in good faith for over five years. It is not hyperbole to say it is one of if not the most important legal cornerstone supporting the development of this multi-billion dollar industry.
Despite the intentional similarity in definitions of “money transmitting business” in both Section 5330 and Section 1960, and despite FinCEN’s 2019 Guidance, the DOJ has taken the position that the definition of a “money transmitting business” under the BSA is not relevant to determining whether someone is operating an unlicensed “money transmitting business” under Section 1960. This position does not comport with the law, congressional intent, nor the realities of the technology.
For years, courts have repeatedly looked to Section 5330, FinCEN regulations, and FinCEN Guidance for the precise purpose of understanding what “money transmitting” means under Section 1960(b)(2). In none of those cases has a criminal court analyzing a Section 1960 violation supported or endorsed DOJ’s novel interpretation of the statute. Yet, the DOJ has ignored both this guidance and precedent to pursue its new interpretation of “money transmitting business” in the form of criminal indictments against individual software developers. The result: two separate U.S. government agencies with conflicting interpretations of “money transmission” — an unclear, unfair position for law-abiding industry participants and innovators.
Logically, if a person is not operating a “money transmitting business” as defined in the statutes requiring the licensure of money transmitting businesses, that person should not be subject to criminal liability for operating an “unlicensed money transmitting business.” This interpretation conforms with Congressional intent and common sense. As explained by Senators Lummis and Wyden: “[T]he statutes and regulations are clear that direct receipt and control of assets are required elements of money transmission. Indeed, this limiting factor is essential, otherwise a wide range of additional services such as internet service providers or postal carriers could inadvertently be caught in the definition of a money transmitting business since they routinely send, receive and process information and messages regarding payments.”
If left unaddressed, the DOJ’s departure “from the clear, logically sound, and well-established definition of ‘money transmission’ established by FinCEN” would expose every technology developer of non-custodial software within the reach of the U.S. to criminal liability. The resulting, and very rational, fear among developers would effectively end the development of these technologies in the United States, push U.S. innovators overseas, and tarnish confidence in the DOJ’s respect for the rule of law. The federal government should not be playing a game of bait and switch. Congress should urge the DOJ to correct its misapplication of the law, and clarify Section 1960 to more clearly convey Congress’s intent.
Respectfully signed,
Paradigm
Multicoin Capital
A16z Crypto
Polygon Labs
Decentralization Research Center
Slingshot Finance, Inc.
Electric Coin Co.
IoTex
Filecoin Foundation
dYdX Trading Inc.
Ledger
Variant
Dragonfly
Orca Foundation
Blockchain Association
Coinbase
Jump Crypto
Cedar Innovation Foundation
UDHC
CoinList
Aleo Network Foundation
Exodus
ZeroEx Inc
JW Verrett, Associate Professor, George Mason Antonin Scalia Law School
True Ventures
Kraken
DCG
Jito Labs
Consensys
Uniswap Labs
Crypto Council for Innovation
Wormhole Foundation