Sacramento County District Attorney Ho published an opinion piece Monday arguing that the U.S. government should promote innovation rather than punish it, specifically calling out ambiguous crypto regulations as a driver of developer flight overseas.
Market Context
The opinion piece arrives amid ongoing debate about how federal statutes apply to cryptocurrency developers. Section 1960 of the U.S. Code was enacted to target traditional money-transmitting businesses such as storefronts, wire services, and exchange houses that handle other people's money. However, Ho argues federal prosecutors have stretched the statute to reach developers of noncustodial, peer-to-peer blockchain technology who never held customer funds.
Analysis
"Regulation-by-prosecution" approaches to crypto development are chilling open-source innovation and pushing many U.S. developers offshore, according to Ho. The District Attorney points to a measurable decline in American technological leadership: the U.S. share of open-source developers fell from 25% in 2021 to 18% in 2025, driven by a lack of clear rules for software development.
Ho, who has spent more than 25 years as a prosecutor handling gang crimes, financial crimes, and high-tech offenses, draws an analogy to Investigative Genetic Genealogy technology used to solve the Golden State Killer case. "We should promote innovation, not punish it," he writes. He contends that charging developers under statutes designed for traditional financial intermediaries represents overreach.
The DOJ issued a memorandum in April 2025 entitled "Ending Regulation-by-Prosecution," making clear the department would not enforce pure regulatory violations under Section 1960 where software is truly decentralized and automates peer-to-peer transactions without third-party custody of user assets. Ho notes, however, that neither a memo nor a speech constitutes statute.
Key Numbers
- U.S. share of open-source developers: fell from 25% in 2021 to 18% in 2025
- Cases prosecuted annually by Sacramento County DA's office: nearly 30,000
- Staff size of Sacramento County DA's office: approximately 500 employees
What to Watch
Congress is considering the Promoting Innovation in Blockchain Development Act, which Ho says would restore the original intent of Section 1960. The bill targets unlicensed financial intermediaries rather than open-source developers. Separately, custodial exchanges knowingly processing criminal proceeds, centralized mixers obscuring illicit funds, and platforms flouting FinCEN registration requirements remain legitimate enforcement targets under existing law.
Market participants should monitor whether Congress advances crypto-specific legislation in the current session or relies on prosecutorial guidance that can shift with administrations.