Key Takeaways
- The senators presented Storm from Tornado Cash’s prosecution as why existing unlicensed money transmission statutes must remain available to prosecutors pursuing individuals connected to platforms facilitating financial crimes.
- Coinbase announced Wednesday it was withdrawing support for the legislation, citing objections to multiple components beyond developer protections.
Senior US senators with oversight of federal criminal prosecution have challenged key cryptocurrency market structure legislation, arguing that developer protections embedded in the bill would cripple law enforcement’s ability to pursue unlicensed money transmission cases.
Chuck Grassley, the Iowa Republican chairing the Senate Judiciary Committee, and Dick Durbin, the panel’s top-ranking Democrat from Illinois, submitted a letter on Wednesday to Banking Committee leaders expressing concern over language drawn from the Blockchain Regulatory Certainty Act that appeared in draft legislation released this week.
According to media reports, the contested provisions would establish that non-custodial software developers—programmers who create crypto applications without maintaining control over user assets — cannot be classified as money transmitters requiring federal or state licensing. This framework aims to distinguish between developers writing code and financial intermediaries handling customer funds.
Grassley and Durbin characterised this distinction as creating dangerous prosecution barriers. Their correspondence warned that the exemptions would generate “a significant enforcement gap for decentralized digital asset platforms” while attracting “illicit actors like cartels and other sophisticated criminal organizations to decentralized platforms.”
The letter specifically referenced the Justice Department’s case against Roman Storm, a developer facing charges related to Tornado Cash, a crypto mixing service. The senators presented Storm’s prosecution as demonstrating why existing unlicensed money transmission statutes must remain available to prosecutors pursuing individuals connected to platforms facilitating financial crimes.
“Criminals already use tactics to obscure unlawful transactions. This bill would make prosecuting this conduct even more difficult,” the senators wrote, arguing that developer exemptions would handcuff investigators attempting to dismantle cryptocurrency operations serving criminal enterprises.
Their intervention carries procedural weight beyond policy disagreement. The Judiciary Committee holds jurisdiction over Title 18 of federal criminal code, which encompasses money transmission offenses, as well as oversight authority for the US Department of Justice, Federal Bureau of Investigation, and Department of Homeland Security— agencies responsible for investigating and prosecuting financial crimes.
Grassley and Durbin emphasised that they received no advance consultation before the Banking Committee published its draft Monday. “The Senate Judiciary Committee which has jurisdiction over Title 18 was not consulted or given the opportunity to meaningfully review the proposed changes in advance,” they stated, framing the Banking Committee’s approach as procedurally irregular.
The letter requested that Banking Committee Chairman Tim Scott, a South Carolina Republican, and ranking member Elizabeth Warren, a Massachusetts Democrat, strip any language diminishing prosecution capabilities for unlicensed money transmission operations.
This objection compounds difficulties already plaguing the cryptocurrency legislation. Both the Banking and Agriculture Committees abruptly canceled Thursday markup sessions Wednesday night after recognizing they lacked votes to advance the bill through committee consideration. The postponements signal that neither panel has secured sufficient bipartisan agreement on the legislation’s framework.
The Banking and Agriculture Committees spent months developing proposals to partition regulatory authority between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission for cryptocurrency oversight. Their January 12 draft incorporated Blockchain Regulatory Certainty Act language alongside these jurisdictional definitions.
Meanwhile, crypto exchange Coinbase announced Wednesday it was withdrawing support for the legislation, citing objections to multiple components beyond developer protections. The company disclosed Friday that discussions with Senate offices continue despite its public opposition, suggesting negotiations remain fluid.
Should the bill survive committee review and reach the Senate floor, it faces a 60-vote threshold required to overcome procedural obstacles. With Republicans holding 53 seats, passage would demand support from at least seven Democratic senators.
