Fostering Innovation, Not Hindering It: A Call to Action for the Government

The sudden cessation of the Golden State Killer's crimes in the 1980s remained a mystery for over three decades, until the advent of Investigative Genetic Genealogy (IGG) finally led to the culprit's capture. This groundbreaking technology, combining forensic DNA analysis with genealogical research, has since been instrumental in solving over a thousand cold cases worldwide. However, the question arises: what if such innovations were overly regulated or banned? The consequence would be a denial of justice to countless victims and their families. The principle should be to promote innovation, not punish it. Ambiguous rules and enforcement practices in areas like cryptocurrency create confusion, stifle growth, and drive industries underground or offshore, where they can be exploited by genuine criminals. As the District Attorney of Sacramento, with over 25 years of experience in holding individuals accountable for their actions, I have seen firsthand the importance of clear laws. The distinction between a genuine criminal and an industry caught in the crossfire of a law not intended for them is crucial. Federal prosecutors have been misapplying a statute against software developers who have never handled customer funds, operated a traditional business, or harbored criminal intent. This is not justice; it is overreach. The original purpose of 18 U.S.C. Section 1960 was to target money-transmitting businesses that skirt licensing requirements, not to criminalize software development. Yet, federal prosecutors have stretched this section to include developers of noncustodial, peer-to-peer blockchain technology, who have never held user funds and have no ability to intercept or redirect assets. Charging them under a statute designed for traditional financial intermediaries is a mistake. The 'regulation-by-prosecution' approach to crypto development is misguided, as it chills innovation, drives developers offshore, and undermines American technological leadership. The U.S. share of open-source developers has decreased significantly due to a lack of clear rules. Chasing developers overseas results in infrastructure being built beyond U.S. oversight, posing a risk to public safety. The recent memorandum from the United States Department of Justice, 'Ending Regulation-by-Prosecution,' is a step in the right direction, as it clarifies that the DOJ will not enforce pure regulatory violations under Section 1960. However, this change is not enough; clarity written into law is necessary. The Promoting Innovation in Blockchain Development Act, currently before Congress, aims to restore the original intent of Section 1960, protecting the public from unlicensed financial intermediaries while promoting innovation. It is essential to distinguish between the tool and the criminal who wields it. We should not charge email providers for wire fraud; instead, we should identify the actual bad actor and prosecute them with evidence. Section 1960 remains a powerful tool against genuine money-transmitting criminals in the digital asset space. The answer lies in robust enforcement against actual criminals, not in abandoning the distinction between the tool and the criminal. As a child refugee from Vietnam who has dedicated his career to justice, I believe that the rule of law must protect both communities from violent crime and innovators from overreach. It is our basic obligation to get this distinction right and let American innovation thrive.