Senators Ron Wyden and Cynthia Lummis are taking a stand against the Department of Justice (DoJ) for its controversial interpretation of laws regarding cryptocurrency. They are questioning the DoJ's approach of treating crypto software services, such as Samourai Wallet and Tornado Cash, as unlicensed money transmitters, which they believe is overstepping legal boundaries.

In a detailed letter addressed to Attorney General Merrick Garland, Wyden and Lummis point out that the Treasury Department's Financial Crimes Enforcement Network (FinCEN) has never classified non-custodial crypto services as money transmitters. They argue that the DoJ's actions risk labeling software developers as criminals solely for writing and sharing their code, a dangerous precedent that contradicts decades of settled law and raises serious First Amendment concerns.

The inquiry comes after the recent pursuit of the crypto privacy business Samourai by federal prosecutors. The letter, dated May 9, contends that treating developers of non-custodial crypto asset software as potential criminals goes against well-established legal interpretations.

The senators' letter further discusses a recent DoJ court filing where the department argued that FinCEN's guidance on crypto mixers does not adequately address the issue of "control." The DoJ believes that any service facilitating the transfer of funds fits the legal definition of a "money transmitter," comparing it to how a USB cable transfers data. However, the senators argue that actual control of the funds is required for such a classification, a point not met by many crypto services.

The letter to Garland expresses grave concerns about the broad interpretation of the statute concerning unlicensed money transmitting businesses, suggesting that this interpretation dramatically expands the scope of the federal prohibition, potentially criminalizing Americans involved in non-custodial crypto services.

Congress is currently working on legislation to set comprehensive U.S. rules for the digital assets industry, including protections against money laundering. While important bills are expected to be voted on soon, the likelihood of sweeping legislation passing this year remains low. This leaves the DoJ to operate under existing laws, which, as the senators argue, may be stretched beyond their intended scope.

The clarification provided by FinCEN's rules states that money transmission involves the direct receipt and control of assets, which comports with common sense. The senators emphasize that assets like Bitcoin have a clear unilateral owner at all times, and if a user wishes to transfer Bitcoin to someone else, they use their private key to sign a transaction which transfers the Bitcoins to a new address. This definition is crucial in preventing other service providers like internet or postal services, which transmit information related to payments, from being inadvertently classified as money transmitters.