LONDON (IT BOLTWISE) – The recent events surrounding Roman Storm and the Tornado Cash protocol are shining a spotlight on the legal uncertainties facing developers in the decentralized finance space. Storm, who was recently convicted of operating an unlicensed money transfer service, questions whether developers of DeFi protocols can be safe from similar prosecution. This uncertainty could have far-reaching effects on the industry’s innovation and growth.
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The sentencing of Roman Storm, one of the developers of the Tornado Cash protocol, has caused a stir in the world of decentralized finance (DeFi). Storm was found guilty in August of participating in a conspiracy to run an unlicensed money transfer service. This decision has raised fears that developers of open source software could potentially face retroactive criminal prosecution if their projects are deemed non-compliant with regulatory requirements.
Storm’s case raises the question of whether developers of DeFi protocols could be considered money transfer services, even if their software is decentralized and non-custodial. This uncertainty could significantly impact innovation in the industry, as developers may be reluctant to launch new projects for fear of legal repercussions. US legal authorities could argue that any decentralized, non-custodial service should have been developed as custodial, increasing the legal risks for developers.
Meanwhile, Matthew Galeotti, the acting assistant attorney general of the U.S. Department of Justice’s Criminal Division, has signaled that the department does not intend to retry Storm’s case or pursue similar cases. Galeotti emphasized that simply writing code without malicious intent should not be considered a crime. This statement could be seen as a relief for the developer community, but it still leaves many questions unanswered, especially regarding the future regulatory landscape for DeFi projects.
The uncertainty about the legal framework for DeFi developers could also have an impact on the willingness to invest in this sector. Investors may be hesitant to invest in projects that potentially face legal risks. This could slow the development and adoption of new technologies and harm U.S. competitiveness in the global technology market. The industry is therefore demanding clear and transparent guidelines to promote innovation while ensuring regulatory compliance.
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