The District Attorney of Sacramento County is sounding the alarm on what he characterizes as regulatory overreach in the digital asset space, arguing that ambiguous enforcement practices are stifling American innovation and pushing developers overseas.
Market Context
The debate over how to regulate cryptocurrency and blockchain technology has intensified as federal prosecutors have increasingly relied on 18 U.S.C. Section 1960—a statute originally designed for traditional money-transmitting businesses—to pursue software developers building noncustodial, peer-to-peer protocols. The approach has drawn criticism from industry advocates who argue it conflates toolmakers with the criminals who misuse their products.
Analysis
District Attorney Ho, who led the prosecution team that brought the Golden State Killer to justice using Investigative Genetic Genealogy, draws parallels between protecting innovative investigative technology and safeguarding blockchain development. He contends that federal prosecutors have stretched Section 1960 beyond its original intent, applying a statute built for storefront wire services and exchange houses to open-source software developers who never held customer funds.
"Charging them under a statute built for traditional financial intermediaries is a mistake, because it is misinformed and misdirected," Ho wrote in an opinion column published Monday on CoinDesk. "As prosecutors, justice requires that we charge people with what they actually did, under laws designed to cover it."
The Sacramento DA argues that the "regulation-by-prosecution" approach has measurable consequences for American technological leadership. According to data cited in his column, 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.
Key Numbers
- 7 percentage point decline: U.S. share of open-source developers from 2021 (25%) to 2025 (18%)
- Over 1,000 cold cases solved globally using Investigative Genetic Genealogy since its first deployment
- Nearly 30,000 cases prosecuted annually by the Sacramento County District Attorney's Office
What to Watch
In April 2025, the Department of Justice issued a memorandum entitled "Ending Regulation-by-Prosecution," signaling that it would not enforce pure regulatory violations under Section 1960 against developers of truly decentralized software. The DOJ stated it would not approve new charges where evidence shows software is decentralized and automates peer-to-peer transactions without third-party custody of user assets.
However, Ho emphasizes that prosecutorial guidance can change with administrations. He is advocating for the "Promoting Innovation in Blockchain Development Act," legislation currently before Congress that would codify clearer distinctions between money-transmitting businesses and software developers. The bill seeks to restore Section 1960's original intent: targeting unlicensed financial intermediaries rather than open-source protocol creators.
The Sacramento DA supports robust enforcement against genuine bad actors—custodial exchanges processing criminal proceeds, centralized mixers obscuring illicit funds, platforms flouting FinCEN registration requirements—but argues these legitimate targets do not include "a software developer in a Sacramento apartment who wrote a peer-to-peer protocol and never held a dime of someone else's money."