U.S. Senators Question Justice Department’s Pursuit of Crypto Mixers

As a researcher with a background in cryptocurrency and digital assets, I find it disconcerting to see the ongoing legal battle between U.S. senators and the Department of Justice (DOJ) regarding the classification and prosecution of crypto mixing services like Tornado Cash and Samourai Wallet as unlicensed money transmitters.

As a researcher, I’d put it this way: A pair of U.S. senators from different political parties has raised concerns about the unconventional legal approach the Department of Justice (DOJ) is taking in targeting cryptocurrency software services as unlicensed money-transmitting businesses, a move that breaks new ground and merits further discussion.

Senators Ron Wyden and Cynthia Lummis wrote to Garland expressing concerns over the strategy being taken against companies like Samourai Wallet and Tornado Cash. They brought up that FinCEN, a part of the Treasury Department, has previously stated that non-custodial crypto services should not be classified as money transmitters.

Wyden expressed worry on Monday that the Department of Justice’s (DOJ) interpretation could label software developers as criminals merely for creating and distributing code used by others, setting a risky precedent that clashes with established legal principles and raises significant First Amendment concerns.

Last month, federal prosecutors targeted Samourai as the latest crypto privacy business under investigation. A bipartisan group of lawmakers wrote a letter dated May 9th, expressing their concern that holding developers of non-custodial crypto asset software accountable as unregistered money transmitters goes against the traditional understanding of this provision.

The Department of Justice (DOJ) disagreed with FinCEN’s interpretation of crypto mixers in their court filing, stating that anything facilitating fund transfers falls under the definition of a “money transmitter.” Using analogies, the DOJ compared a cryptocurrency wallet to a USB cable transferring data or a frying pan transmitting heat.

In their letter, the lawmakers stated that the rule compels the service to exercise authority over the funds and categorize it as a money transferrer.

The U.S. Congress has been working on digital asset legislation to create comprehensive regulations for the industry, including money-laundering safeguards. One major bill could be put to a House of Representatives vote as early as next week. However, it’s unlikely that extensive laws will pass this year, meaning federal agencies must continue enforcing current rules in the interim.