Blockchain developer Michael Lewellen has filed a lawsuit against the U.S. Department of Justice (DOJ), accusing the Biden administration of suppressing cryptocurrency innovation by misinterpreting federal money transmission laws.
The case centers on Pharos, Lewellen’s non-custodial protocol for decentralized crowdfunding, which allows users to pool cryptocurrency for projects without involving intermediaries. Lewellen argues that Pharos operates as a tool rather than a financial service, as it does not control or hold user funds. He claims the DOJ’s approach wrongly categorizes such protocols as money transmitters, discouraging developers and pushing innovation offshore.
“This isn’t just about Pharos,” Lewellen said. “It’s about protecting the future of crypto development in America from regulatory overreach.”
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The lawsuit also highlights concerns over the DOJ’s enforcement actions against similar projects like Tornado Cash, which Lewellen says deviate from past FinCEN guidance that exempted non-custodial tools from money transmitter laws. Lewellen’s case reflects broader tensions between U.S. regulators and the crypto sector, where developers demand clearer policies to foster innovation while authorities push for stricter oversight to combat illicit activities. Industry advocates, including the DeFi Education Fund and Coin Center, have expressed support for Lewellen, calling his legal challenge a pivotal step in defending open-source development.
This case could have far-reaching implications for how decentralized protocols are regulated and how the U.S. positions itself in the global crypto landscape.
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