Cryptocurrency developer files lawsuit against Department of Justice over increased regulation under Biden administration
Blockchain developer Michael Lewellen has filed a lawsuit against the US Department of Justice (DOJ), accusing the President Joe Biden administration of stifling innovation in the crypto sector through overly broad interpretations of federal money-transmission laws.
Lewellen’s lawsuit revolves around his work with Pharos, a non-custodial protocol that enables trustless and transparent crowdfunding campaigns. Pharos allows users to pool crypto for charitable causes or projects without intermediaries.
In a statement, Lewellen described his decision to sue as a stand against regulatory overreach, saying:
“Today, I’m taking a stand against the Biden administration’s unjust crackdown on crypto development […] This isn’t just about Pharos; it’s about the future of cryptocurrency innovation in America.”
Legal challenge
Lewellen argues that his non-custodial protocol, viewed as a tool rather than a financial service, should not be subject to federal money-transmitting laws.
Unlike traditional money transmitters like Western Union or Venmo, Pharos does not manage the funds being transferred. Instead, it empowers users to conduct transactions independently, maintaining privacy and reducing reliance on intermediaries.
Lewellen asserts that the DOJ’s actions against developers of similar non-custodial protocols, such as Tornado Cash, indicate an alarming expansion of federal authority.
He also mentions that these prosecutions contradict previous guidance from FinCEN, which had stated that non-custodial tools did not fall under money transmission laws.
Lewellen adds:
“The DOJ’s broad interpretation of money transmission laws jeopardizes the freedom to innovate […] The Biden administration has long used ambiguity to deter technology advancement or push developers out of the USA.”
Broader implications
This lawsuit underscores the increasing tension between US regulators and the crypto industry. Developers like Lewellen argue that unclear regulations push innovation overseas, while policymakers believe stricter oversight is crucial to combat illicit activities and safeguard consumers.
Amanda Tuminelli, chief legal officer at the DeFi Education Fund, praised Lewellen for advocating for software developers, calling the lawsuit “heroic.”
Meanwhile, Peter Van Valkenburgh, CEO of non-profit Coin Center, expressed support for Lewellen in defending his right to release software.
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