New Legislation for Decentralized Software Developers
On Thursday, a bipartisan coalition of legislators proposed new legislation aimed at relieving certain decentralized software developers from criminal charges. This development raises questions about the future of privacy-centric cryptocurrency laws in Washington, particularly amidst the discussions on a stalled market structure bill, which may feature comparable provisions.
Promoting Innovation in Blockchain Development Act
The newly introduced legislation, named the Promoting Innovation in Blockchain Development Act, seeks to modify U.S. criminal code 1960. This statute has previously been employed by both the Biden and Trump administrations to prosecute developers in the cryptocurrency field. Specifically, it defines what constitutes an unlawful money transmitting operation. The proposed changes would narrow its scope to include only those who exert control over currency, thereby excluding many developers from risk.
The bill was brought forth in the House of Representatives by three lawmakers: Scott Fitzgerald (R-WI), Ben Cline (R-VA), and Zoe Lofgren (D-CA). This initiative follows a noteworthy case last year, where a Manhattan jury convicted an Ethereum developer for creating Tornado Cash—a privacy-enhancing tool. The developer contended that he should not be labeled as the operator of an illegal money transmitting business since he did not manage users’ funds directly.
Similarly, under former President Trump’s administration, the Justice Department secured convictions against two developers who operated the Bitcoin platform Samourai Wallet for violating the same statute.
Industry Response
Industry advocates, such as the DeFi Education Fund, have hailed the new bill as a crucial measure for developers.
“This bill clarifies that developers, who do not hold or control others’ funds, can create neutral technologies domestically without the fear of facing criminal charges typically associated with financial intermediaries,”
the group remarked.
Future of Crypto Legislation
Meanwhile, the legislation that addresses the broader market structure is likely to make noteworthy mentions of code 1960 but does not plan on an overhaul of the current statute. The anticipated language would, however, suggest that developers who do not hold control over user funds should not be regarded as participants in money transmission activities under code 1960.
As the crypto legislation evolves, discussions surrounding decentralized finance (DeFi)—which involves financial services directly built on blockchain technology without intermediaries like banks—remains fluid. Although unfinished, this aspect of the bill appears not to be a dealbreaker, according to insiders. There are ongoing debates between industry representatives and banking interests concerning stablecoin rewards, compounded by continued disagreements among Senate Democrats and the White House over issues related to conflicts of interest and Trump’s crypto-related endeavors. With the midterm elections approaching, lawmakers are pressing for significant advancements on this bill or face the possibility of it stalling before Congress’s spring recess.
