A coalition of 34 leading cryptocurrency businesses, led by the DeFi Education Fund, sent a letter to senior U.S. congressional leaders, Senators Tim Scott and Elizabeth Warren, among others, in an attempt to push them into action on what they describe is the Department of Justice’s (DOJ) “unprecedented and overly expansive” interpretation of money transmission laws. The letter, addressed to the members of the Senate Committee on Banking and the House Committee on Financial Services, among others, specifically calls for an explanation of Section 1960 of the U.S. Code, a money transmission unlicensed law. This pressure follows closely on the heels of high-profile court actions against the authors of Tornado Cash, a crypto mixer, and has once again fueled the bigger debate on the future of innovation, regulation, and anonymity in the world of crypto.
The Road to the Tornado Cash Case
The row traces back to August 2023 when DOJ indicted Roman Storm and Roman Semenov, two of the three founders of Tornado Cash, with sanctions offenses and money laundering. Tornado Cash is a decentralized finance service based on the Ethereum blockchain that allows users to anonymize crypto transactions by mixing and aggregating funds, essentially erasing the traceable chain on the blockchain.
Even though this technology has legitimate uses, such as protecting financial anonymity for individuals living under oppressive governments, it’s also been exploited by malicious actors. Tornado Cash was accused of facilitating the laundering of over $1 billion in criminal funds, including funds tied to North Korea’s Lazarus Group, one of the globe’s most notorious hacking crews.
The prosecution of Tornado Cash’s creators was a significant milestone in the U.S. government’s effort to regulate decentralized finance (DeFi). In contrast to traditional financial services, though, Tornado Cash is a series of smart contracts, code on the Ethereum blockchain that the developers cannot directly control after they have deployed it. The charging of the developers under Section 1960, which defines money transmission as the transfer of funds “on behalf of the public by any and all means,” raised alarm bells among the crypto community. The government’s interpretation meant that software developers would be held responsible for how their code is used, whether or not they custody or control user funds—a complete departure from previous regulatory precedent.
This was not the first time Tornado Cash had been criticized. In 2022, the U.S. Treasury Department Office of Foreign Assets Control (OFAC) had blacklisted the service, putting its smart contracts on a blacklist, which was greeted with court cases by the crypto industry. In the Netherlands, Tornado Cash co-founder Alexey Pertsev was convicted in 2024 of money laundering and created an unsettling precedent for developers globally. These events highlighted a growing tension: while tools like Tornado Cash are touted by some as a cornerstone of financial liberty, regulators view them as possible enablers of criminal behavior.
The Call to Action of the DeFi Education Fund
The March 26, 2025, Letter signed and published by industry leaders like Coinbase, Kraken, Uniswap Labs, and Consensys states that the DOJ’s reading of Section 1960 is dangerous overreach. The coalition contends that the DOJ is going against the guidance of the Financial Crimes Enforcement Network (FinCEN), which in 2019 established that non-custodial software developers—those that do not take possession or control of users’ funds—are not money transmitters. By asserting that Section 1960 can be applied to developers in both custody situations, the DOJ is doing what the letter calls “regulation by criminal indictment,” a method that creates uncertainty and discourages innovation.
Amanda Tuminelli, the DeFi Education Fund’s executive director and chief legal officer, emphasized the stakes in a Decrypt interview: “The DeFi Education Fund’s number one policy priority is to receive Congressional clarity on Section 1960.” The letter warns that without action, the DOJ position would have a “chilling effect on open-source development in the U.S.,” since developers would risk criminal exposure for publishing code that might be interpreted as facilitating money transmission. In a highly dramatic example, the letter notes that by the DOJ’s current logic, “basically every blockchain developer would be criminally prosecutable,” a development that would encourage innovation and expertise to leave the U.S.
The appeal of the crypto community to Congress isn’t merely about Tornado Cash—it’s about the broader implications for software development in DeFi, AI, and other emerging technologies. The letter is calling on Congress to “correct the DOJ’s misapplication of the law” and clarify Section 1960 so that software developers are protected from liability for third-party use of their code.
Implications for the Crypto World
The outcome of this war could reshape the world of crypto in many profound ways.
The Future of Crypto Privacy
Tornado Cash and similar services are emblematic of a key promise of blockchain technology: financial privacy. Ethereum co-founder Vitalik Buterin publicly defended Tornado Cash, revealing that he had used the tool to anonymize a donation to Ukraine following Russia’s invasion in 2022. NSA whistleblower Edward Snowden has likened Tornado Cash to a “public utility” for privacy, calling the attack on its developers “deeply illiberal and profoundly authoritarian.” If the DOJ’s interpretation of money transmission laws prevails, privacy-focused tools will become even rarer, as developers may not want to create them in order to avoid the risks of legal entanglement. This would go against a central tenet on which cryptocurrencies operate, pushing people towards more centralized competition that is not as difficult for governments to control.
Innovation at Risk
The blockchain industry has always maintained that the hyper-vigilant quest for regulation kills innovation, and the DOJ treatment of Section 1960 does the trick nicely. DeFi, founded on decentralized protocols and open-source code, has been a hotbed of experimentation, resulting in new products like yield farming, decentralized lending, and trading. However, if creators are held up to criminal liability for how their code is used, then lots of them would choose to cease innovating—or move operations to more crypto-friendly jurisdictions. The letter from the DeFi Education Fund points out this risk, stating that the DOJ’s approach “creates a liability for software developers of non-custodial technology in the United States.” A mass exodus of talent would abandon the U.S.’s leadership of blockchain technology to other countries.
Regulatory Clarity and the Role of Congress
The crypto community has repeatedly requested clear, tailored regulations rather than piecemeal enforcement measures. The letter of the DeFi Education Fund points toward the necessity of Congressional intervention and providing transparency to Section 1960 so that the law becomes aligned with the realities of decentralized technology. In the absence of transparency, the industry would be left with a clouded future, where developers must play it by ear themselves in a murky legal landscape. A positive response by Congress would establish a precedent for how regulators address other emerging technologies, finding balance between the requirement to regulate them and the desire to encourage innovation.
A Global Precedent for Regulation
The Tornado Cash case is observed closely around the world, with other governments scrambling to regulate DeFi and anonymity tools. The Netherlands’ conviction of Alexey Pertsev has already rattled the international crypto world, and the same outcome in the U.S. would provide other governments with a precedent to follow and take equally harsh policies. Conversely, if Congress heeds the cry of the crypto industry and reined in the DOJ, it would create a fairer precedent, so that other regulators worldwide would make a distinction between the developers and the users of their technology.
The Path Forward
The letter from the DeFi Education Fund is a milestone in the battle of the crypto industry to exist in an increasingly hostile regulatory environment. To date, March 27, 2025, the subject has garnered considerable attention, with Cointelegraph reporting on the efforts of the alliance and sparking discussion on social media outlets like X. Some, like @HarishDGupta, framed the situation as a “battle for dev freedom,” while others, like @Caila_AI, condemned the DOJ’s method as being like “blaming meteorologists for rain”.
Stakes are as elevated as possible. If the position of the DOJ on money transmission laws prevails, it has the potential to forever alter the direction of the crypto world for the worse, discouraging development of privacy tech and decentralized tools. On the other hand, a victory effort for Congressional clarity would provide entrance into an approach that is much more supportive of innovation, assuring the United States remains the hub of blockchain development.
As the crypto world waits with bated breath, one thing is clear: the conclusion of this debate will have far-reaching implications, not just for the designers of Tornado Cash, but for financial anonymity’s future, for software coding, and for the global crypto economy’s future. Congress’ message from the industry is clear and loud—now it’s legislators’ turn to choose whether or not to hear it.
