Senator Blasts DOJ's Stance Over Self-Custody Crypto Wallets

The U.S. Department of Justice (DOJ) has taken legal action against software developers that developed and operated self-custody cryptocurrency wallets, and Sen. Cynthia Lummis, R-Wyo., is highly concerned about it.

The Republican senator said in a Wednesday statement that she was "deeply troubled" by what she calls the DOJ's "hyper-aggressive argument that non-custodial software can constitute a money transmission service." The DOJ now deems that money transmission laws cover wallet developers, even those who have no custody or no control of users' digital assets.

In its latest legal complaint related to private digital wallets, the DOJ accused privacy-focused Bitcoin wallet and mixing service Samourai Wallet of executing over $2 billion in "unlawful transactions" and operating without a money transmission license. The wallet's two founders, Keonne Rodriguez and William Lonergan, were arrested in Pennsylvania and Portugal, respectively, last week. Rodriguez has since been released on a $1 million bond, but will remain on house arrest until his trial.

Another high-profile case that the crypto space has been following is the DOJ's criminal indictment against Roman Storm, the developer of the crypto mixing tool Tornado Cash. Storm filed to dismiss the indictment that accused him of conspiring to commit money laundering and violating sanctions. However, the DOJ quickly moved to block Storm's motion.

"The defendant cannot obtain dismissal of the Indictment by simply making factual assertions about his own contested view as to how the Tornado Cash service operated and based on his own self-serving version of his intent or lack thereof when taking certain acts," the DOJ said in a filing.

Lummis said the Justice Department's stance regarding non-custodial software "contradicts existing Treasury guidance, common sense and violates the rule of law." She added that arguments against self-custody software "threaten the fundamental property rights that are core to being an American."

The Wyoming senator went on to say that she was concerned about how the government under U.S. President Joe Biden was "criminalizing core tenants of the Bitcoin network and decentralized finances (DeFi)."

This is not the first time Sen. Lummis has spoken up for the digital assets sector. In October, she reiterated that crypto assets are not the enemy of the government, "bad actors are" following reports that Palestinian terror group Hamas used cryptocurrencies to fund their war against Israel.

She said lawmakers should push for a robust regulatory framework that will block the misuse of cryptocurrencies by threat actors, while also "rewarding good stewards for their innovation and advancement in this space."

Meanwhile, crypto advocacy group Coin Center also called out the DOJ for charging non-custodial wallet developers. "This is an insidious development that appears to be nothing less than regulation by criminal enforcement," the group argued.