The cryptocurrency lobbying group Coin Center recently further elaborated its position that software code constitutes protected speech under the First Amendment of the U.S. Constitution. However, there remains ongoing uncertainty about whether cryptocurrency developers can be held liable for how their technological innovations are used.
In a report released on Monday, Peter Van Valkenburgh, Executive Director of Coin Center, and Research Director Lizandro Pieper stated that writing and publishing cryptocurrency software code is essentially no different from writing a book or publishing a recipe.
The two authors argue that the First Amendment protects individual speech and expression, providing developers who are only responsible for publishing and maintaining software with robust constitutional protection.
“They are speakers and inventors, not agents, custodians, or trustees. Extending pre-registration or licensing requirements to such expressive activities contradicts the historical logic of financial regulation and imposes typical prior restraints on activities centered on speech and expression—constraints that are almost always unconstitutional,” they added.
Crypto software developers have been seeking legal protection to avoid criminal liability for the software they create. Last year, several crypto developers, including Roman Storm of Tornado Cash, were convicted due to how their software was used, in a case that attracted widespread attention.
Regulations apply when developers interact directly with users.
Van Valkenburgh and Pieper stated that the report aims to provide a framework for courts and regulators to distinguish between protected software distribution activities and developers' professional conduct.
They believe that when developers control users' assets, execute transactions on behalf of users, or make decisions for users, it falls within the scope of regulable activities.
The lower courts’ confusion between conduct and speech in software distribution has promoted the so-called “functional code theory,” undermining protections under the First Amendment,” they noted.
"Some courts have argued that because software can be executed and produce real-world effects, it is more akin to conduct than speech," they added.
We believe such activities constitute pure expression of speech, and even if some lower courts have deviated, the Supreme Court’s existing judicial interpretations continue to uphold this view.
They cited the 1985 case of Lowe v. SEC, in which the Supreme Court ruled that when a publisher does not hold assets for clients or act on their behalf, such activity is protected under free speech and does not constitute regulated professional conduct.
Crypto developers cannot be made scapegoats.
In certain cases, cryptographic software eliminates traditional intermediaries, enabling self-custody and peer-to-peer transactions without the need for a centralized authority.
Traditionally, financial institutions acting as intermediaries are regulated by governments and required to hold licenses because they act on behalf of users.
Van Valkenburgh and Pieper argue that while establishing a regulatory framework around new technologies is highly challenging, classifying software developers as intermediaries for the sake of "administrative convenience" is not a solution.
“Encryption software does not require novel legal theories or unique exemptions. It requires the faithful application of established First Amendment principles to new technological environments,” they added.
In the computer age, software has become the primary means of expressing ideas and organizing economic life; the importance of these principles has not diminished, but rather become more pronounced. Writing and releasing code is speech. In a free society, speech cannot be silenced by licensing restrictions.
Last year, Storm was convicted of conspiring to operate an unlicensed money transmitting business, but his attorney has been working to file a motion to dismiss the case based on the Supreme Court case Cox Communications Inc. v. Sony Music Entertainment, arguing that he did not intend to participate in the alleged criminal activity.
The two co-founders of Samourai Wallet, a privacy-focused Bitcoin wallet, were also convicted on the same charges and sentenced to prison terms of four to five years.