Senators Warn DOJ’s Money Transmitting Biz Interpretation “Criminalizes” Bitcoin

News | May 27, 2024 By:

On Thursday, May 9, 2024, U.S. Senators Cynthia Lummis (R-WY) and Ron Wyden (D-OR) sent a letter to U.S. Attorney General Merrick Garland expressing “significant concerns” about the Department of Justice’s (DOJ) interpretation of “money transmission” as it relates to cryptocurrency. The senators warned that the DOJ’s interpretation “threatens to criminalize core elements of Bitcoin and other crypto networks.”

In the letter, Lummis and Wyden said the DOJ has dramatically expanded the scope of the federal prohibition on operating an unlicensed money-transmitting business in its cases against the co-founders of Samourai Wallet and Tornado Cash. They argued that direct receipt and control of assets is necessary for money transmission under the statute, and services like internet service providers or postal carriers are not considered money transmitters even though they process payment information.

However, the DOJ has recently interpreted the statute to include noncustodial cryptocurrency service providers as money transmitters. The senators noted that with noncustodial services, users retain full possession and control of their crypto assets at all times – the services do not “accept” assets from users. All transactions are signed and processed locally without third-party access.

The Financial Crimes Enforcement Network (FinCEN) agrees with this interpretation, but the senators expressed concern that the DOJ has adopted a different reading from another federal agency. They said this lack of consistency “makes it difficult for ordinary Americans to determine what their legal obligations are.”

The senators argued FinCEN’s definition “comports with common sense” as crypto assets like Bitcoin unambiguously have a clear owner during transactions. At no point is ownership uncertain. Subjecting developers of noncustodial services to potential criminal liability contravenes established interpretations and will stifle innovation and confidence in the DOJ, according to the letter.

The DOJ has yet to comment on the senators’ concerns. Its expanded view of money transmission was seen in the prosecutions of Samourai Wallet and Tornado Cash for executing over $100 million and $1 billion in alleged unlawful transactions, respectively. While prosecutors said the services laundered funds for darknet markets and sanctioned entities, the senators believe the DOJ has overreached in its legal theory.