Senators Lummis (Republican) and Wyden (Democrat) have introduced the Blockchain Regulatory Certainty Act to prevent software developers and distributed ledger maintainers from needing money transmitter licenses. It only applies to developers that do not control balances or initiate transactions.
“This designation makes no sense when they never touch, control, or have access to user funds, and unnecessarily limits innovation,” said Lummis. “This bill gives our developers the clarity they need to build the future of digital finance without fear of prosecution for activities that pose no money laundering risk. It’s time to stop treating software developers like banks simply because they write code.”
They certainly have a point that requiring money transmitter licenses in every state is enormously onerous and would limit innovation. The bill’s relevance is underscored by recent events. Just weeks ago, wallet startup Kontigo suffered a security breach (more on their post mortem later) resulting in the loss of client funds, although the breach was small enough that they were able to reimburse clients. Kontigo does not have money transmitter licenses or any licenses, because the app involves “self custody” for non technical users.
This raises an important question about wallet developers in general: while money transmission licenses are overkill, if developers are reckless or negligent in their work, should there be consequences? If a wallet suffers a security breach which loses their client’s money, shouldn’t they need a third party audit and perhaps constrain growth to ensure they are safe? It’s one thing for social media firms to move fast and break things, but wallet providers are responsible for user funds.
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