Does Money Transmitting Require Control? DOJ Says No in Tornado Cash Litigation

The DOJ’s recent legal submission in the Tornado Cash case against cryptocurrency mixing service developers Roman Storm and Roman Semenov maintains that being a money transmitter does not automatically mean having “control” over the funds. This claim relies on Section 18 U.S.C. § 1960, part of the United States Code (U.S.C.). Essentially, Section 18 U.S.C. § 1960 deals with the oversight of businesses engaged in the transmission of money.

Prosecutors argue that the essence of the term “transfer” does not necessitate “control” over the item that is being moved or made to pass from one entity to another. “For instance, a USB cable transfers data from one device to another, and a frying pan transfers heat from a stove to the contents of the pan,” the lawyers write. “Although neither situation involves exercising ‘control’ over what is being transferred.”

Section 18 U.S.C. § 1960.

Many cryptocurrency supporters on social media argue that the prosecutors’ comparison falls short because, unlike inert tools such as USB cables or frying pans, money transmitters actively oversee financial transactions. The DOJ’s interpretation of “transfer” in this case as simply moving items without control is excessively wide and extremely unclear, potentially including a wide range of activities that do not align with the regulatory and legal frameworks of financial transactions.

Extending the definition to include passive, non-controlling transfers dilutes the specific legal requirements for money transmitters to actively monitor. “This is… not good,” the X account Bitcoin Rothbard posted. “From the Tornado Cash case. Their broad definition of money transmission would encompass pretty much everything, regardless of if funds were ever not in users’ control. It’s imperative for the future of Bitcoin that this gets defeated.”

Another individual wrote:

This definition is so broad that if you plugged your cold wallet to a PC via a USB cable that hooks into a frying pan, the frying pan would constitute a financial institution.

The DOJ’s interpretation sparked considerable criticism on social media throughout the weekend. “Newer, vastly overreaching definition of ‘money transmitter’ just dropped,” former Bitcoin developer Jeff Garzik remarked. Others posted images of frying pans and computer cables, poking fun at the prosecutors’ arguments. “Do you have a money transmitter license for that ethernet cable, anon?” quipped the X account Pledditor.

“Every ISP is a money transmitter,” another individual stated on the social media platform. “Greyhound is a money transmitter. Every phone is a money transmitter. Every car is a money transmitter. Time to take down this illicit economy of physical matter far and wide.”

Others believe the broad interpretation undermines the statute’s intent to ensure accountability and prevent criminal misuse of money-transmitting services, creating ambiguity in its enforcement and applicability. The definition utilized in the DOJ’s argument contradicts the currently established meaning of a money-transmitting service.

As the crypto community grapples with the implications of the DOJ’s stance on money transmission in this case, this broader interpretation poses significant challenges. Should the court uphold this expansive definition, it could set a precedent that impacts not only Tornado Cash but potentially the entire sector.

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