DeFi Debrief

Week of August 25, 2025: DOJ on Section 1960; Treasury RFC; Paradigm Submission on DeFi; Uniswap Foundation Proposal; SEC Speech

Acting AAG of DOJ’s Criminal Division Delivers Remarks on Section 1960 at American Innovation Project Summit

On August 19, 2025, American Innovation Project (AIP), a new nonpartisan, educational 501(c)(3) organization dedicated to fostering informed dialogue on the policy and technology issues shaping the future of the U.S. economy, officially announced its launch. 

On August 21, 2025, AIP held its inaugural Summit in Jackson Hole, Wyoming. At the AIP Summit, Acting Assistant Attorney General (AAG) of the Department of Justice (DOJ)’s Criminal Division, Matthew Galeotti, delivered remarks – followed by a fireside chat Q&A with DEF’s Executive Director and Chief Legal Officer, Amanda Tuminelli. You can watch a livestream of the speech here.

In line with the Deputy Attorney General Blanche’s Memorandum published in April 2025 (click here for DEF’s analysis), AAG Galeotti recommitted that DOJ will not “use federal criminal statutes to fashion a new regulatory regime over the digital assets industry,” nor “leave innovators guessing as to what could lead to criminal prosecution.” 

Regarding Section 1960 and third-party liability for software developers, AAG Galeotti stated:

“We may, under certain circumstances, bring cases under Section 1960(b)(1)(C), which prohibits the transmission of funds that the defendant knows are derived from a criminal offense, or are intended to be used to support unlawful activity. However, going forward, consistent with principles of notice and fairness, let me make the following clear:

Many developers have relied on regulatory guidance to suggest that non-custodial cryptocurrency software does not constitute an unlicensed money transmitting business. While that guidance may not be binding on the Department, its implications can of course factor into prosecutors’ charging decisions. Therefore, where the evidence shows that software is truly decentralized and solely automates peer-to-peer transactions, and where a third party does not have custody and control over user assets, new 1960(b)(1)(C) charges against the third-party will not be approved. Though, if criminal intent is present, other charges may be appropriate. All of a subject’s conduct and the services they provide end-to-end will be considered.

Generally, developers of neutral tools, with no criminal intent, should not be held responsible for someone else’s misuse of those tools. If a third-party’s misuse violates criminal law, that third-party should be prosecuted — not the well-intentioned developer.”

The remarks acknowledged that the DOJ’s position on Section 1960 had been unclear and that in order to provide developers with fair notice of how the DOJ would apply the law going forward, the DOJ will not approve charges in cases where developers lack custody and control over user assets. This interpretation is a big step in the right direction. It will also be invaluable to developers building in this country right now and may rely on this guidance consistent with their due process and fair notice rights.

The speech represents an affirmation of the advocacy that DEF and others have done on Section 1960 – our writing and research on Section 1960 and the Bank Secrecy Act (BSA), and our advocacy to Congress and the Administration on Section 1960. 

We continue to support Roman Storm, who was convicted by jury trial of this exact charge - “conspiracy to operate an unlicensed money transmitting business” under 18 U.S.C. § 1960(b)(1)(C). AAG Galeotti’s statement will aid Storm’s counsel in their advocacy efforts, including in post-trial motions and the appeal process. 

Treasury Department Issues Request for Comment on Illicit Activity Involving Digital Assets

On August 18, 2025, Treasury issued a Request for Comment pursuant to the Guiding and Establishing National Innovation for US Stablecoins Act of 2025 (GENIUS Act). The request is the first GENIUS Act-related Treasury action to be taken according to its implementation timeline. (For more details on the timeline of the GENIUS Act, please read our blog here.) 

Pursuant to GENIUS Section 9, “Anti-Money Laundering Innovation,” Treasury requests information on four specific technologies: application program Interfaces (APIs), artificial Intelligence (AI), digital identity verification, and the use of blockchain technology and monitoring. 

Regarding “digital identity verification,” Treasury acknowledges ongoing industry efforts to develop “portable digital identity credentials.” However, in addition to the use of digital identity verification “by regulated digital asset intermediaries,” the Treasury seeks information regarding “digital identity verification tools” potentially implemented “by decentralized finance (DeFi) services' smart contracts to automatically check for a credential before executing a user's transaction.”

The Treasury requests public comments by October 17 on factors including “the amount and sensitivity of information that is collected or reviewed; privacy risks associated with the information that is collected or reviewed; operational challenges and efficiency considerations; cybersecurity risks; and effectiveness of the methods, techniques, or strategies in mitigating illicit finance.” After the comment period, the Treasury will conduct research on the methods identified in such period.

Team DEF will respond to the Request for Comment to ensure that DeFi technology, users, and developers are protected. Let us know if you have thoughts.

Paradigm Submits DeFi-Focused Comments to CFTC 

On August 18, 2025, Paradigm submitted a letter to the Commodity Futures Trading Commission (CFTC) in response to the CFTC’s request for input on the listing of spot crypto asset contracts on designated contract markets (DCMs). In its response, Paradigm supports the CFTC’s efforts to expand regulated crypto trading but urges the Commission to also embrace DeFi protocols as a legitimate and beneficial alternative.

Paradigm urges the CFTC to support DeFi alongside DCMs, warning that failure to do so could push innovation offshore and undermine the U.S.’s leadership in digital financial markets. Read Paradigm’s full submission here. DEF applauds Paradigm for their letter and urges the CFTC to recognize the value of decentralized protocols in promoting market integrity, user empowerment, and financial innovation.

Uniswap Foundation Files for Wyoming DUNA

On August 11, 2025, the Uniswap Foundation published a Uniswap DAO governance proposal to register Uniswap governance as a Decentralized Unincorporated Non-profit Association (DUNA) under Wyoming’s 2024 statute. The proposed legal entity, representing Uniswap’s Decentralized Autonomous Organization (DAO), will be called “DUNI.” The DUNI would not have control over the protocol or the UNI token, but would provide the DAO a legal wrapper - an entity that can sign contracts, pay service providers, and handle taxes. The point, according to the Foundation, is to preserve decentralized governance while giving participants the shield of limited liability.

Wyoming’s DUNA law treats DAOs as separate legal entities, more like nonprofits than partnerships. That matters because courts have increasingly viewed DAOs as partnerships, exposing every token holder to liability. By registering as a DUNA, the DAO itself - not its members - bears responsibility for contracts, taxes, and legal claims. After two years of research, the Foundation concluded this structure struck the right balance between decentralization and off-chain practicality. 

For broader context on why DAOs need legal structures like this, see DeFi Education Fund’s DAOs in the Crosshairs.

DAOs are a critical element of the DeFi ecosystem. Earlier this year, DEF and Uniswap Foundation submitted comments to the Securities and Exchange Commission (SEC) Crypto Task Force exclusively focused on SEC treatment of DAOs and decentralized governance. DEF congratulates Uniswap Foundation. 

SEC Chairman Paul Atkins Delivers Speech in Jackson Hole 

On August 19, 2025, SEC Chairman Paul Atkins joined SALT Wyoming Blockchain Symposium in a fireside chat entitled: “Inside ‘project crypto’: a conversation with SEC Chairman Paul Atkins.” In the speech, Chairman Atkins emphasized clarity and flexibility as the two main values, aiming “to set firm and helpful guidelines that can be changed later, while remaining flexible as the technology develops.” 

He also mentioned that the SEC is working with other federal agencies through the President’s Working Group and will implement the recommendations in the Working Group’s Report as soon as possible (please read our blog for detailed analysis on the report.) Further, he confirmed that “tokens themselves are not necessarily securities, but it depends on the packages around [them] and how they are sold.” 

DeFi Dictionary

As @amandatums wrote in her mid-year letter, DEF "is the bridge between D.C. and DeFi," and our focus is on "securing durable wins for the DeFi industry."

A large part of that is ensuring laws do not encroach on users' ability to conduct peer-to-peer transactions:

Notable and Quotable