In recent months, the Department of Justice (DOJ) has faced backlash for its investigations and prosecutions of cryptocurrency developers, specifically targeting cases that critics say stifle innovation in the crypto space. Notably, the DOJ's actions against non-custodial wallet and protocol developers have been deemed as "regulation by criminal prosecution" by some industry representatives.
Peter Van Valkenburgh, a prominent figure in the field, critiqued the DOJ's prosecution of Tornado Cash and Samourai for unlicensed money transmission charges. He voiced his concerns via Twitter, stating, "It’s one thing to do 'regulation by enforcement,' as we’ve arguably seen from the SEC. It’s even worse to see the DOJ engage in regulation by criminal prosecution."
Coin Center, an advocacy group for cryptocurrency policy, has expressed support for Michael Lewellen's lawsuit challenging the DOJ's interpretation of unlicensed money transmission laws. The group maintains that Lewellen, a Coin Center Fellow, should be able to freely develop his software without fear of prosecution.
In response to ongoing criticisms and Lewellen's lawsuit, the Deputy Attorney General released a memo declaring an end to "regulation by prosecution." The memo clarifies that the DOJ will not target developers of cryptocurrency tools simply because some users engage in unlawful activities. Despite this memo, the document isn't binding on future administrations, and Coin Center emphasizes the need for statutory clarity and appropriate judicial precedent.
The memo impacts cases such as Tornado Cash and Samourai Wallet, which Coin Center argues should be dropped. The organization plans to support the defense in these cases alongside the Bitcoin Policy Institute.
Another case under scrutiny is against Anton and James Peraire-Bueno, accused of earning $25 million by exploiting a vulnerability in Ethereum's open-source software, MEV-Boost, and charged with conspiracy, wire fraud, and money laundering. Coin Center argues that these charges against validators, who operate as neutral infrastructure, resemble unjust regulation by prosecution. "Validators are like ISPs or electric utilities: they execute protocol-defined rules automatically and without discretion," explains Coin Center.
The organization asserts that the Peraire-Bueno brothers utilized legitimate competition strategies within protocol rules, and criminalizing this behavior distorts the neutrality of Ethereum's base layer. "Calling this wire fraud misunderstands both MEV and legal standards," Coin Center asserts.
The DOJ's approach posits a significant threat to open blockchain networks, warns Coin Center, which argues that this case raises constitutional concerns. The advocacy group calls for the dismissal of the case, aligning with the DOJ's updated policy to end prosecutions that label neutral economic activity as criminal.
Coin Center remains committed to defending Tornado Cash, Samourai, and the Peraire-Bueno brothers, advocating against penalties for neutral participation in open networks. The organization praises the DOJ's recent policy change but insists on further action, urging the administration to align entirely with its new directive.
