The Department of Justice has stated it will not pursue charges against developers who build decentralized platforms in good faith. The new policy, outlined in a recent memo, signals a shift away from “regulation by prosecution” and will instead focus on prosecuting individuals who use the platforms for criminal activities, such as fraud and money laundering.
According to a senior official on Thursday, the US Justice Department will not pursue software developers who develop decentralized platforms for the transmission of cryptocurrencies without criminal intent.
Acting Assistant Attorney General Matthew Galeotti stated at a digital assets summit in Wyoming that writing computer code is not criminal.
“We believe that writing code without malicious intent is not a criminal offense,” he stated. He also mentioned that the agency is transitioning away from taxing developers who neglect to register as money transmitters.
Decentralized Exchanges Say They Lack Control Over User Transactions
Money transmitters, including PayPal and Cash App, must obtain licenses. Additionally, they are obligated to investigate suspicious activity and verify consumers.
Nevertheless, the crypto sector has encountered a flashpoint due to these obligations. Decentralized exchanges contend that they cannot satisfy these criteria due to their lack of supervision of the transactions on their platforms.
The debate was further exacerbated by the conviction of Roman Storm, a co-founder of Tornado Cash, by a New York jury earlier this month for conspiracy to operate an unlicensed money transmitting business.
Tornado Cash is a service that prioritizes privacy by reducing the ease of tracing cryptocurrency transactions. Nevertheless, the jury could not determine whether Storm was culpable of sanctions evasion or money laundering.
Prosecutors claimed that the service facilitated illicit finance, while critics of the case contended that Storm had merely written code.
DOJ Pledges To Pursue Fraud, Ponzi Schemes And Laundering Networks
Galeotti observed that future prosecutions will necessitate unequivocal evidence of criminal intent. This encompasses the intentional facilitation of sanctions evasion, laundering, or deception.
Furthermore, he specified that statutes prohibiting money transmission without a license will not be employed against developers. They would only be applicable if a developer intentionally violated the law.
“It is not a crime to develop new methods for the economy to store and transmit value and create wealth, provided that there is no ill intent,” Galeotti stated.
He also stated that the Justice Department will persist in pursuing criminals, citing investment fraud, Ponzi schemes, and China-based laundering networks.
Prosecutors to Emphasize Intent Over Technical Classification in Crypto Cases
Galeotti emphasized that the law is not technology-specific. He stated that tools may be misused; however, those who do so should be prosecuted. Developers acting in good faith should not face charges.
Also, this signifies a significant policy change. Federal prosecutors in Manhattan charged Tornado Cash during the Biden administration. Concurrently, the Securities and Exchange Commission (SEC) initiated numerous investigations against cryptocurrency companies.
In contrast, the Department of Justice (DOJ) under President Donald Trump dissolved its crypto enforcement team. Furthermore, regulators discontinued numerous lawsuits against executives in the industry.
The change suggests a growing understanding in Washington that decentralized platforms operate differently from traditional money transmitters.
Many developers had sought clarity on potential liability for publishing open-source software. In response, Galeotti said those concerns had been heeded. He also stated that prosecutors would now prioritize intent over technical classification.
The remarks were warmly received by crypto advocates, who viewed them as a positive development toward more transparent regulations. They contended that the threat of prosecution should not impede innovation.
Simultaneously, anti-money laundering organizations cautioned that privacy tools and decentralized protocols could still facilitate widespread criminal activity if left unregulated.