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New US Bill Shields Bitcoin Developer: The Code Liability Reset
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Developer portraits reflect a shifting legal landscape for Bitcoin software creators under new federal legislation.
The Illusion of a Legislative Shield: Why 'Fixing' Code Liability Misses the Point
Section 1960 of US federal law, designed for brick-and-mortar money transfer, just got a legislative 'fix' aimed squarely at software developers. But when a new bill arrives explicitly to tell the government what code isn't, the market needs to ask why that was ever unclear. In my twenty years in global finance, clarity often signals concession, not just progress.
Today, the focus is on a bipartisan push in the US House of Representatives. Representatives Scott Fitzgerald, Ben Cline, and Zoe Lofgren introduced the "Promoting Innovation in Blockchain Development Act." It's designed to protect builders of blockchain and crypto tools.
Breaking constraints represents the decoupling of software development from liability under federal Section 1960.
The core message is simple: developers who write code, maintain networks, or build platforms without ever touching user funds should not be treated as unlicensed money transmitters. This is a direct response to a legal interpretation that has seen software engineers facing federal criminal charges simply for creating open-source tools.
🚩 The Long Shadow of Regulatory Overreach
The notion that writing neutral software could land a developer in federal prison for operating an unlicensed money transmitting business is a peculiar one. Yet, this has been the uncomfortable reality for segments of the crypto industry for years.
⚖️ The problem stems from Section 1960 of federal law. This statute, drafted long before the internet, let alone decentralized networks, has been broadly applied. It targets entities that "knowingly conduct, control, manage, supervise, direct, or own all or part of an unlicensed money transmitting business."
This broad interpretation means that merely contributing to a protocol or maintaining a decentralized network, even without controlling user assets, has been interpreted by some prosecutors as "operating" such a business. It's a fundamental misunderstanding of how decentralized technology works.
The result? US-based developers have faced an untenable regulatory environment, often pushing talent and innovation overseas. This isn't theoretical; it has already led to significant legal battles and convictions.
Digital structures symbolize protective boundaries established by the proposed blockchain innovation act for software developers.
When Code Became Criminal: Real-World Consequences
👮 The urgency behind this new legislation is rooted in recent, high-profile prosecutions that sent genuine shockwaves through the developer community. These cases highlight the extreme lengths to which regulators have stretched existing laws.
Roman Storm, a developer for the privacy-enhancing protocol Tornado Cash, was convicted in August 2025 on charges related to running an unlicensed money transmitting business. This verdict created a chilling precedent, suggesting that contributing to open-source, neutral technology could carry severe legal risks.
Similarly, the co-founders of Samourai Wallet, Keonne Rodriguez and Will Lonergan Hill, pleaded guilty to similar charges. They were handed prison sentences of five and four years, respectively. Their crime, in the eyes of the law, was building a non-custodial wallet that facilitated privacy. In both cases, the developers built tools, but critically, did not hold or manage user assets directly.
These prosecutions underscore the legal vacuum that has existed, forcing developers to operate under the constant threat of mischaracterization. The proposed bill aims to explicitly carve out developers who are not financial intermediaries.
📌 Market Impact Analysis A Cautious Optimism
This legislative move, if successful, offers a temporary boost to developer sentiment within the US. The immediate short-term impact could see a slight uptick in the confidence of US-based teams working on infrastructure and privacy-preserving tools. This might translate to a perception of reduced "jurisdictional risk" for certain types of crypto projects.
However, the long-term effects are more nuanced. We're not talking about a sudden surge in Bitcoin or Ethereum prices directly attributable to this. This is about structural clarity. A clearer legal framework for developers could stem the brain drain of crypto talent from the US, potentially attracting more innovation back to American shores.
The intersection of law and technology marks a defining moment for Ethereum and decentralized infrastructure.
Sectors like DeFi and privacy-focused applications, which have faced the brunt of regulatory ambiguity, could see a gradual loosening of legal apprehension. The bill attempts to clarify that writing code for a decentralized exchange or a privacy mixer does not inherently make one a money transmitter, as long as no custody is taken.
Yet, the market's reaction should be measured. The distinction between "holding funds" and "facilitating illicit activity" remains a potential battleground. Regulators still have other tools at their disposal, such as sanctions laws or broader anti-money laundering frameworks. This bill addresses one specific legal interpretation, not the entire regulatory playbook.
📍 Historical Parallel The 2017 DAO Report and Uncomfortable Lessons
⚖️ The most similar historical parallel to today's legislative attempt to clarify developer liability is the 2017 DAO Report from the US Securities and Exchange Commission (SEC). That event, which followed the infamous DAO hack on the Ethereum blockchain, fundamentally reshaped how the crypto industry viewed regulatory risk.
In 2017, the SEC issued a report concluding that tokens issued by The DAO, a decentralized autonomous organization built purely on code, were unregistered securities. This was a pivotal moment. The outcome was a clear signal that the SEC would apply existing securities laws to novel, code-based digital assets, irrespective of their decentralized nature.
The key lesson learned was that "code is law" was a technical truth, but not a legal one. Regulators would interpret the function and economic reality of a decentralized project through the lens of established legal frameworks, often stretching those frameworks to fit. The burden was placed on innovators to prove they weren't violating old laws.
In my view, the "Promoting Innovation in Blockchain Development Act" is a direct, if belated, acknowledgment that the SEC's 2017 DAO Report interpretation and subsequent prosecutions like Tornado Cash's Roman Storm were a profound misapplication of law. It's a retreat, not just an advance for innovation.
Policymakers signal a strategic reconfiguration of federal oversight regarding non-custodial digital asset tools and platforms.
Today's bill is different from the DAO report in its focus: the DAO report targeted tokens as securities, impacting fundraising. This bill targets developer liability for building tools, impacting infrastructure. Yet, the identity remains: both highlight the friction between decentralized principles and centralized legal frameworks, and both stemmed from regulators attempting to fit square pegs into round holes with chilling effects on US innovation.
Stakeholder
Position/Key Detail
US House Representatives (Fitzgerald, Cline, Lofgren)
Sponsoring bill to protect developers from money transmitter laws.
Blockchain Association
⚡ Supports bill, sees it as critical for US-based blockchain development.
DeFi Education Fund (DEF)
Applauds bill, believes it protects builders of neutral technology.
Tornado Cash Developer (Roman Storm)
Convicted Aug 2025 for unlicensed money transmitting business, faces sentencing.
Samourai Wallet Co-founders (Rodriguez, Hill)
Pleaded guilty to similar charges, received prison sentences.
US Senators (Lummis, Wyden)
Introduced similar "Blockchain Regulatory Certainty Act" in Senate.
📝 Key Takeaways
New bipartisan US House bill, 'Promoting Innovation in Blockchain Development Act,' seeks to protect crypto developers from being deemed unlicensed money transmitters.
The bill aims to tighten the definition of 'money transmitting business' under Section 1960, specifically excluding developers who don't control user funds.
Recent high-profile prosecutions of Tornado Cash and Samourai Wallet developers underscore the urgency and real-world impact of current legal ambiguities.
This legislative push follows a similar Senate initiative, signaling a broader political acknowledgment of the issue.
While a step towards clarity, the bill's focus on "holding funds" still leaves open questions about developer liability for facilitating illicit activities, reflecting a tension between innovation and regulatory concerns.
🔮 Thoughts & Predictions
The DAO Report of 2017 taught us that the default posture of US regulators is to apply the broadest possible interpretation of existing laws to crypto. This new bill is an attempt to claw back some of that overreach, particularly regarding developer liability for building neutral tools. It's a legislative concession, not a revolutionary embrace.
The current legislative push will likely spark a temporary surge in developer confidence within the US, potentially attracting some talent that previously looked offshore. However, the true test will be how quickly and effectively these definitions are adopted into court precedent, especially considering the ongoing cases like Roman Storm's. The bill appears written for future prosecutions, leaving past convictions in a legal limbo.
Ultimately, this bill doesn't fundamentally resolve the ideological clash between truly permissionless innovation and nation-state control. It merely draws a new line in the sand, one that can still be moved by creative prosecutors or future legislation. Investors should watch for shifts in the narrative around 'facilitation' versus 'control' in future enforcement actions, as that distinction remains a potent regulatory weapon, regardless of who holds the keys.
🎯 Investor Action Tips
Monitor the final text of the "Promoting Innovation in Blockchain Development Act" for precise definitions around "holding" or "controlling" digital assets, as subtle phrasing shifts could impact its protective scope for projects like decentralized exchanges or privacy tools.
Track developer emigration data, observing whether the flow of US-based blockchain talent and project launches (e.g., GitHub activity, new venture funding for US entities) shows a measurable increase, signaling genuine impact beyond political messaging.
Analyze precedent in ongoing cases: Pay close attention to the outcome of Roman Storm's sentencing and any appeals. If the bill becomes law, watch for legal arguments in these cases that challenge its applicability, as that will define its real-world effectiveness.
Examine privacy-focused project activity: Evaluate the reaction and potential re-emergence of privacy-enhancing projects like mix-nets or truly decentralized messaging platforms in the US, as these are precisely the kinds of tools that have been stifled by past interpretations of money transmission.
📘 Glossary for Serious Investors
Section 1960: A US federal law prohibiting the operation of unlicensed money transmitting businesses, often broadly applied to digital asset activities.
Money Transmitting Business (MTB): A legal classification for entities that provide money transfer services, which, under broad interpretation, has been applied to non-custodial software developers in crypto.
🧭 The Question Nobody's Asking
Does legislation that attempts to "fix" a fundamental conflict between code and law merely create an illusion of clarity, or does it genuinely bridge the chasm between decentralized ambition and centralized control without introducing new points of regulatory leverage?
💬 Investment Wisdom
"Code is speech, but the state prefers it to be a confession." — coin24.news Editorial
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