The growing tension between the U.S. government and the cryptocurrency industry has escalated as a crypto developer filed a lawsuit against the U.S. Attorney General. The case centers on the legality of software used in cryptocurrency transactions, with the developer arguing that the government’s actions jeopardize the future of innovation in decentralized technology.
The developer, Michael Lewellen, claims that current regulatory actions label software as illegal simply for enabling crypto transactions. He argues that this approach infringes on constitutional rights and undermines legitimate innovation.
Michael created Pharos as a blockchain initiative focused on creating a scalable, decentralized infrastructure that bridges traditional finance (FinTech) with Web3 innovations. Its primary goal is to onboard billions of users and real-world assets into the decentralized ecosystem through hyper-parallelism in consensus, execution, storage, and hardware integration.
This model allows for high-performance scalability and global real-time payment solutions. It recently raised $8 million in seed funding from investors like Lightspeed Faction, Hack VC, and SNZ Capital to develop its protocol further and grow its ecosystem.
Pharos is also building partnerships, such as its collaboration with ZAN, the Web3 division of Ant Digital Technologies, to enhance Web3 infrastructure with a focus on node services, security, and hardware acceleration. Its approach is centered on merging real-world assets with decentralized finance to drive mainstream adoption of blockchain technology.
The lawsuit by Michael argues that the Department of Justice (DOJ) is misinterpreting a law that is meant to regulate businesses involved in transferring money on behalf of others. This law, 18 U.S.C. §1960, was designed to target intermediaries who handle money for customers.
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However, Michael claims the DOJ is wrongfully applying it to developers who create cryptocurrency software that lets people manage and transfer their own funds directly.
This legal challenge coincides with a broader pushback against the U.S. Securities and Exchange Commission (SEC). On November 14, 2024, attorneys general from 18 states, in partnership with the DeFi Education Fund, sued the SEC over what they described as “untenable” enforcement actions. The coalition accuses the agency of overstepping its authority by regulating digital assets without proper congressional approval.
Kentucky Attorney General Russell Coleman, leading the case, stated: “We are fighting to keep the federal government from reaching into Americans’ wallets—both physical and digital. The Biden administration’s crackdown on cryptocurrency is unlawful, and we are taking action to stop it”.
