Bipartisan Senate Letter Urges DOJ to Cease Attack on Bitcoin Privacy Software
Two senators who support cryptocurrency have written a letter to the Justice Department (DOJ), urging them to reconsider their recent enforcement action against a popular Bitcoin privacy service.
Protecting Bitcoin Privacy Tools
Senator Cynthia Lummis (R-WY) publicly shared the letter on Monday, arguing that the DOJ’s interpretation of what constitutes an unlicensed “money services business” (MSB) is unprecedented and contradicts both Treasury Department guidance and the intent of Congress.
The letter, co-authored by Lummis and Senator Ron Wyden (D-OR), states that the DOJ’s interpretation could criminalize Americans offering non-custodial crypto asset software services.
Late last month, the DOJ arrested the founders of Bitcoin mixer Samourai Wallet on charges of operating an unregistered MSB. CoinJoin transactions were used by Samourai to enhance user privacy, which involves multiple parties combining the inputs and outputs of their transactions into one, making the flow of funds difficult to trace on the blockchain.
Although Samourai’s wallet required a centralized server for coordinating CoinJoin transactions, the service never gained control of users’ actual funds. This makes the legal aspect of Samourai’s case complex, given the definition of “money transmission” in the Bank Secrecy Act.
What Counts as Money Transmission?
The senators argue that the current definitions should not apply to non-custodial crypto asset software in order to avoid involving groups like internet service providers and postal code carriers as MSBs. They assert that users maintaining control of their private keys should not fall into the MSB definition.
The letter concluded by stating that subjecting developers of non-custodial crypto asset software to potential criminal liability would stifle innovation and erode confidence in the DOJ’s adherence to the rule of law.
However, the DOJ’s interpretation suggests that a money transmitter does not need actual control of the funds being transferred. It compares money transmission to a USB cable transferring data between devices or a frying pan transmitting heat from a stove to its contents.
The DOJ has issued a warning to crypto users, stating that they could lose funds in wallets provided by non-regulated entities, which may face future prosecution.
In sum, the bipartisan letter from Senators Lummis and Wyden urges the DOJ to drop its interpretation and allow for the development of non-custodial crypto asset software without criminal liability.