Lawmakers from the two main political parties in the US have proposed to curb the federal government’s use of a key criminal statute against blockchain software developers, following high-profile prosecutions tied to crypto privacy tools.
US Congress Moves to Redraw the Boundaries of Money Transmission
27 February 2026 - 19:59 CET
By Ana Pereira
The draft Promoting Innovation in Blockchain Development Act of 2026 was introduced on 26 Feb to clarify the reach of the federal law that criminalizes operating an unlicensed money transmitting business.
In amending Section 1960 of the federal criminal code, the bill would ensure that the statute applies only to individuals or entities that exercise control over customer funds and transmit money on behalf of customers.
The change is intended to counter concerns that software developers are exposed to criminal liability even when they do not have custody of, or control, the assets of those using their tools.
The control debate
The debate over whether to better protect developers has gone far into the linguistic weeds of the rules. It focuses on a phrase in the code referring to the transfer of funds "on behalf of the public".
In a blog post on the bill’s introduction, the DeFi Education Fund argued that transmitting funds "on behalf" of someone necessarily requires exercising control over those funds. The group pointed to 2019 guidance from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which stated that only entities exercising "total independent control" over customer assets qualify as money transmitters under the Bank Secrecy Act framework.
Federal prosecutors in the Southern District of New York have advanced a broader interpretation in recent crypto-related cases, including the prosecutions of developers tied to Samourai Wallet and Tornado Cash.
Tornado Cash
In August 2025, a federal jury delivered a split verdict against Roman Storm, co-founder of the Tornado Cash protocol. Jurors convicted him of operating an unlicensed money-transmission business but could not agree to convict him with more serious laundering and sanctions violations charges. Prosecutors argued that Storm knowingly facilitated laundering by cybercriminals and North Korean hackers, while the defense countered that Tornado Cash was designed to protect user privacy and that open-source developers cannot control later uses.
The mistrial highlighted the uneasy balance between law enforcement and decentralized finance, fueling fears that developers could face prosecution for tools later misused by criminals. It also did not definitively answer the question as to whether developers will continue to be prosecuted if others misuse their products.
Protecting developers
In a statement shared on X, Rep. Ben Cline, one of the bill’s sponsors, said the measure "restores needed clarity by protecting developers who don’t control customer funds, while ensuring law enforcement can continue to target real criminals."
The legislation, co-sponsored by Representatives Scott Fitzgerald and Zoe Lofgren, arrives amid broader congressional efforts to define regulatory boundaries for digital asset markets. This includes the delayed CLARITY Act, which would draw clearer lines between federal regulators and establish oversight for different categories of digital assets, and last year's GENIUS Act, which creates a federal framework for stablecoin regulation.
