A landmark lawsuit challenges the US government’s stance on Web3 development licenses, as the industry anticipates major regulatory changes under new leadership.
The Web3 and digital assets industry in the United States has grown exponentially in the past few years. The involvement of institutional investors in the cryptocurrency market has shifted the political stance towards the cryptocurrency industry. Moreover, the country will have the first pro-crypto president in less than a week, which will significantly change the Web3 landscape in the next four years.
However, the impact of the cryptocurrency crackdown by the outgoing Biden administration will be felt until the last day in office. Moreover, the US SEC and other concerned agencies have been making strategic legal moves against the Web3 space in the recent past.
Michael Lewellen Fights for Web3 Freedom
Michael Lewellen, a revered security expert in the cryptocurrency and Web3 sector, has filed a lawsuit against Merrick Garland, the attorney general for the United States in his official capacity, for attempting to criminalize Web3 developers for publishing software without obtaining a money transmitter license.
Lewellen intends to publish a Web3 protocol and user interface, called Pharos, to facilitate crowdfunding campaigns for charities and other projects. However, Lewellen cannot proceed with the project, despite having ready customers, due to the legal ambiguity.
On one hand, the United States government wants Lewellen to obtain a money transmitter license to publish and operate the Pharos protocol. However, the Pharos platform is a non-custodial entity, which gives the users power over their digital assets.
As a result, Lewellen cannot report the financial details to the relevant government agencies like other financial institutions since he does not have access to the user accounts. Lewellen intends to collect some fees from users for using his software but will not have custodial control over their funds.
“If someone drives his money from one place to another in a Ford truck, Ford does not “transfer” or “transmit” or “accept” the money. That conclusion holds even if Ford manufactured the truck to assist that person with moving money, such as by adding armor and other security features,” Lewellen noted.
The lawsuit cited that the legal persecution of Tornado Cash and Samourai Wallet developers is unconstitutional and anti-innovation. Moreover, Lewellen believes that the development and publishing of Web3 software is part of free speech, which is protected by the United States Constitution.
Bigger Picture
The many cryptocurrency cases in the United States are expected to end under the upcoming Donald Trump administration. The appointment of crypto-friendly SEC chair Paul Atkins to replace Gary Gensler has hinted at a possible shift in Web3 regulatory overhaul.
Moreover, the US Congress is preparing to pass clear crypto regulatory laws in the near term to enable a seamless adoption by institutional investors and retail traders.
However, a win in the United States does not guarantee a similar outcome in other major jurisdictions, led by Europe and the United Kingdom. As a result, Lewellen’s lawsuit against the US DoJ is just the beginning of freedom in Web3 development and software publishing.
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