Crypto Groups Unite Against DOJ’s Expansion of Money Transmission Laws

A formidable coalition of crypto advocacy groups has united to contest the Department of Justice’s efforts to expand money transmission laws to open-source software development. This alliance, which includes the DeFi Education Fund, Blockchain Association, Paradigm, and the Crypto Council for Innovation, is urging a federal court to reject the DOJ’s broad interpretation of regulations that were never intended for software creators.

The DOJ’s ongoing prosecutions target developers like Michael Lewellen, who built and published non-custodial decentralized finance tools. These tools are open-source and do not hold user funds, yet the DOJ argues their publication constitutes unlicensed money transmission. Industry leaders contend this stance is a misapplication of Section 1960 of Title 18 and risks setting a precedent that could criminalize neutral software development.

The coalition’s amicus brief asserts that prosecuting developers simply for publishing code undermines the very foundation of open-source innovation. The groups argue that such legal overreach would not only stifle technological progress but also threaten the security and transparency that open-source projects provide.

Legal Uncertainty Threatens U.S. Crypto Innovation

The DOJ’s aggressive actions have created a climate of legal uncertainty for developers in the U.S. Crypto groups warn that without clear regulatory guidance, developers who have followed the rules and sought legal advice are still exposed to prosecution and potential imprisonment.

Innovation is already experiencing a chilling effect due to this uncertainty. Developers may be forced to move their work offshore or abandon their projects altogether, draining the U.S. of talent and leadership in decentralized finance. The coalition stresses that faith in U.S. law will erode if developers cannot distinguish between lawful and unlawful conduct, further undermining the country’s position in the global crypto landscape.

Industry leaders emphasize that open-source code is a cornerstone of the crypto sector’s growth and security. Restrictions on its development could have far-reaching consequences, not just for individual developers but for the entire ecosystem.

Did you know?
The concept of open-source software dates back to the 1980s, but its application in crypto has been critical for transparency and security. Many of today’s largest blockchain protocols are built on open-source code, allowing anyone to audit, improve, or adapt the technology.

DOJ’s Interpretation of Money Transmission Laws Under Fire

Central to the dispute is the DOJ’s interpretation of money transmission laws, specifically Section 1960 of Title 18. The law was originally designed to regulate unlicensed money transmitters, entities that accept and transmit funds on behalf of others. However, the DOJ now seeks to apply it to developers who merely publish open-source, non-custodial software.

The coalition argues such an approach is akin to prosecuting a frying pan manufacturer for how consumers use their product. Open-source developers do not control or process user funds, and thus, their work should not fall under money transmission regulations. The coalition’s legal filings stress that such a broad application of the law is not only legally flawed but also threatens the future of decentralized software infrastructure in the U.S.

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Industry Calls for Regulatory Clarity and Judicial Restraint

Crypto groups are calling on the government to clarify the scope of money transmission laws before pursuing further prosecutions. The coalition maintains that only a declaratory judgment can provide the clarity needed to protect developers and preserve the neutrality of software development.

Without such clarification, the legal environment will remain hostile, discouraging innovation and potentially sending the next wave of blockchain breakthroughs overseas. The coalition’s legal challenge is not just about one developer; it is a fight for the future of open-source software and the broader crypto industry.

The Stakes: U.S. Leadership and the Future of Open-Source Crypto

The outcome of this legal battle will shape the regulatory environment for years to come. If the DOJ’s interpretation prevails, the U.S. risks losing its leadership in crypto innovation as developers seek friendlier jurisdictions. Conversely, a ruling in favor of the coalition could reaffirm the rights of developers to build and share open-source tools without fear of prosecution.

As cases like U.S. v. Storm and U.S. v. Rodriguez progress, the crypto community is watching closely. The industry's united response highlights the serious implications for the future of decentralized finance, privacy-enhancing tools, and the spirit of open innovation in the United States.