2025 was a year of celebration for many in the crypto industry, who reveled in the undeniable tone shift toward digital asset regulation ushered in by U.S. President Donald Trump’s return to office in January.

This feature is a part of CoinDesk's Most Influential 2025 list.

Politicians and industry leaders alike cheered the ousting of former U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler, the appointment of crypto-friendly regulators and the end of dozens of Biden-era probes into major crypto companies, celebrating it as evidence of the death of regulation by enforcement.

But, while the era of regulation by enforcement may be over (for now, at least), the trial of Tornado Cash developer Roman Storm this summer is evidence that, in the continued absence of true regulatory clarity for crypto, regulation by prosecution is still alive and kicking.

Writing code is (maybe) a crime

Storm, one of the developers and co-founders of embattled crypto mixing service Tornado Cash, was arrested in 2023 and charged with conspiracy to commit money laundering, conspiracy to violate U.S. sanctions and conspiracy to operate an unlicensed money transmitting business — charges which carried a maximum combined sentence of 45 years in prison — for his role in creating a service prosecutors have said was used to launder over $1 billion in criminal proceeds, including by North Korea’s infamous hacking squad, the Lazarus Group.

Storm’s arrest came after his co-founder, Russian national Alexey Pertsev, had already been arrested and charged with similar crimes in the Netherlands. A Dutch court found Pertsev guilty of money laundering under its laws in 2024 and sentenced him to 64 months in prison, which he is currently appealing. The U.S. has also charged a third developer, Russian national Roman Semenov, with the same charges at Storm, though he remains at large.

Storm pleaded not guilty to all three counts. At his Manhattan trial in July, Storm’s lawyers — led by New York-based Cooley LLP partner Brian Klein — argued that Storm and his co-founders had simply created a tool with legitimate, privacy-preserving purposes, which bad actors happened to use for nefarious purposes. In her opening statements for the defense, Waymaker LLP partner Keri Axel likened Tornado Cash to a hammer: in one set of hands, a useful tool for building; in another, a weapon.

Prosecutors argued that Storm and his colleagues knew full well that hackers and scammers were using Tornado Cash and chose not to stop them. They offered the jury evidence purporting to show that Storm profited from criminals’ use of his software and that he was proud of the fact: photos of Storm at a crypto conference, sporting a cheeky t-shirt featuring a washing machine with Tornado Cash’s logo, and pictures of his suburban Washington State home partially purchased with money he’d made during his time at Tornado Cash. They even plugged in a green neon sign of Tornado Cash’s logo found during the FBI raid of Storm’s home, holding it up for the jury to see.

The prosecution’s arguments apparently carried some weight with the jury — but so did Storm’s. After several days of deliberation, the jury came back with just a single guilty verdict on the unlicensed money transmitting conspiracy charge (the least serious of all three charges, carrying a maximum sentence of five years in prison). On the rest, they were unable to reach a unanimous verdict. At the time of publication, prosecutors have not yet indicated whether they intend to retry Storm on the hung charges. Storm’s lawyers have asked the court to dismiss all three charges, including the one Storm was found guilty of.

DeFi developers on the line

Storm’s case drew much attention — and ire — from many in the crypto community, particularly in the decentralized finance (DeFi) sphere. Trade groups and policy advocates like the DeFi Education Fund and the Solana Policy Institute have vocally opposed Storm’s prosecution, submitting amicus briefs and donating to his defense, because they see the government’s case as evidence of prosecutorial overreach that could have a massive chilling effect on the DeFi industry as a whole.

“Unfortunately, [Storm’s] trial has done a huge amount to raise awareness around what is the most existential policy issue facing the entire crypto ecosystem at the moment, which is fundamentally, whether one can be held liable for creating a tool that anyone can use, and someone’s misuse of that tool,” Solana Policy Instititute CEO Miller Whitehouse-Levine told CoinDesk. “His case has brought the threat of the U.S. government holding people criminally liable for how other people use neutral software tools to the forefront of people’s minds.”

Facing the possibility of a hefty prison sentence for how their tools are used — or misused — by third parties is already causing a chilling effect to spread across U.S.-based developers, according to Alex Urbelis, general counsel for the ENS$10.59

“The verdict will have a chilling effect on innovation, particularly for developers working on privacy-preserving technologies like mixers and zero-knowledge protocols,” Urbelis said. “Even if the primary purpose of what you develop is for good and is beneficial to society, the Roman Storm case very much indicates that if a certain amount of third-party misuse happens, there could be criminal liability. So that will make a lot of developers reconsider America as the base for their privacy-preserving products.”

Amanda Tuminelli, executive director and chief legal officer at the DeFi Education Fund, told CoinDesk that Storm’s prosecution has “contributed to a culture of fear” among DeFi developers.

“At base, what Roman did was provide a privacy solution that the Ethereum community wanted and asked for, and that Github gave him a grant to work on,” Tuminelli said. “He created a non-custodial protocol that other people used to transfer their own money. I think a lot of people can see, ‘This could happen to me, I’m building in the space, I’m building a non-custodial protocol, could I be next?’ And I think that really resonated with people across the industry.”

Storm and his colleagues built Tornado Cash out in the open, soliciting funding from major venture capital firms like Dragonfly Capital and doing business under their real names, Urbellis pointed out.

“There was really no fear about this particular project occurring in America because America was America, and free speech is protected, and privacy is something that we hold sacrosanct, supposedly,” Urbellis said. “So this prosecution definitely gives these types of [decentralized privacy] projects a lot of thinking to do in terms of where they base their headquarters and their teams of people.”

Blanche memo

The case against Storm began under former President Joe Biden’s administration, which was characterized by a government-wide unwillingness to provide any real legal clarity to the crypto industry, combined with an overzealous effort to punish those who stepped outside the lines.

Trump’s return to office at the beginning of the year was accompanied by much fanfare about how things would be different for crypto under his second administration. In January, he signed an executive order pledging to establish “regulatory clarity and certainty” for the crypto industry. In April, Deputy Attorney General Todd Blanche sent a memo to all Department of Justice (DOJ) staff, informing them that the era of regulation by prosecution was over, that the entire department would be “narrowing” its focus on crypto enforcement, and would no longer be pursuing cases against crypto exchanges, mixing services or offline wallets “for the acts of their end users or unwitting violations of regulations.”

On its face, the Blanche memo seemed to directly reference Tornado Cash and other similarly situated cases. Lawyers and developers alike speculated that the Southern District of New York (SDNY) would drop their case against Storm. Instead, they responded by trimming a single prong of the money transmitting charge and continuing full steam ahead with their case.

In August, after Storm was found guilty of unlicensed money transmitting, Acting Assistant Attorney General for the DOJ’s Criminal Division Matthew J. Galeotti gave a speech where he said that, in the DOJ’s view, “merely writing code without ill intent is not a crime.”

Steve Merriman, a Seattle-based partner in Perkins Coie’s fintech group, told CoinDesk that both the Blanche memo and Galeotti’s speech do not preclude the DOJ’s ability to criminally charge developers for third-party misuse in certain circumstances.

“They still left open the door to pursue [money transmitting] charges, at least under certain theories if the facts warrant it,” Merriman said.

Both Whitehouse-Levine and Tuminelli told CoinDesk that they believe that the DOJ’s public statements will be helpful for future cases against DeFi developers, but stressed that they don’t go far enough to offer real protection or clarity for industry participants.

Whitehouse-Levine said that he thinks both Galeotti’s speech and the Blanch memo will be useful to future defendants, but added that the DOJ’s avoidance of Prong C — the section of the money transmitting law that deals with funds derived from criminal offenses — was “strategic.”

“It means that the Sword of Damocles hangs over every developer in the space on a going-forward basis,” Whitehouse-Levine said.

A vibe shift is not enough

The crux of the issue is that, while messages like Galeotti’s and Blanche’s are a helpful sign of what the current administration is thinking when it comes to crypto regulation and enforcement, they’re far from a permanent fix.

“We need to permanently change the laws. We need to actually fix the [money transmitting statute] and provide real, permanent changes to how the Department [of Justice] is able to use that law,” Tuminelli said.

Tuminelli and many others in the industry have high hopes that those much-needed changes to the law could come in the form of a market structure bill, which the Senate is currently working on. But, policy insiders say the negotiations are likely to drag into the New Year as Democrats and Republicans continue to iron out disagreements about how the industry should be regulated.

“If you’re a lawmaker, and you are worried about things that are going on in the space, you’re worried that consumers are not protected, you’re worried that illicit finance runs rampant — okay, then what are you doing about it?” Tuminelli said. “You should be working on passing a market structure bill that regulates 95% of the space in a way that is doable and workable, but instead, lawmakers are overly focused on not having developer protections and not having DeFi be protected under the bill…It’s cognitive dissonance. If what you want is to provide a safer regulatory environment for consumers, then pass a regulatory environment that makes it safer for consumers.”

In the absence of regulatory clarity from Congress, it’s likely that much of the industry — especially the DeFi sector — will continue to exist in a legal gray area in which one arm of the government gives something the green light, while another files charges.

“I think [Storm’s prosecution] is the most egregious example of the weaponizing of the judiciary against crypto, not just because of the liability in this instance, but the fact that the agency that gets to define what a money transmitter is disagrees with the DOJ’s interpretation of what a money transmitter is. We cannot have Treasury and DOJ giving different answers as to what obligations people are subject to,” Whitehouse-Levine said.“It’s egregious,” he added. “It should not be a thing that you can go to this side of the government, and they say you’re good to go, and then this side of the government tries to put you in jail.”

The human toll

While many have pointed to Storm’s case as an opportunity to gain a measure of legal clarity for DeFi in the absence of Congressional action, others have highlighted the cosmic unfairness of that debate unfolding while a human being’s liberty is at stake.

“We tend to see this as some kind of wider battle, but there’s a real human being whose liberty is at stake,” Urbellis said. “This is a fight for freedom.”

Klein, Storm’s lawyer, told CoinDesk that the prosecution has been extremely hard on Storm, personally: “It’s an incredibly stressful and difficult time for Roman, as it would be for anybody who is facing a very aggressive — and what I believe is an overly-aggressive and unjustified — prosecution.”

“It is so hard on so many levels ot be the face of anything,” Tuminelli added. “Roman is a person. He has a daughter. He was arrested in front of his daughter. The human element of this [prosecution] is so important to bring back into the conversation. When you Google his name, this is what comes up. I think he has done a really admirable job of staying strong and principles-based…I hope the court system recognizes that he really didn’t do what the indictment says he did. And I’m confident that, even if it's not immediately, we will get to a place where at least the [money transmitting] charge is clarified, and software developers who make noncustodial protocols will not be considered money transmitters. It’s just a question of how long it takes to get there.”

The fight continues

Storm’s legal battle is far from over. A hearing in front of District Judge Katherine Polk Failla of the SDNY is currently scheduled for January 22. During that hearing, the court will consider the defense’s motion to acquit Storm on the three charges against him, and will hear whether the government intends to retry him on the two hung charges.

“Crypto has been at the forefront of the law for a long time, and this case is a case that we view as one that should never have been brought. You shouldn’t try to regulate through a criminal prosecution,” Klein said.