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Two Coalitions Raise Concerns Over Developer Protections in the CLARITY Act

Two coalitions are warning that a broad developer exemption in the CLARITY Act could make enforcement and investigations harder. The Senate still has to decide whether Section 604 should be tightened.

By Mike Hesp
• 2 min read
Two Coalitions Raise Concerns Over Developer Protections in the CLARITY Act

Key Takeaways

  • Two coalitions are raising concerns about Section 604 of the CLARITY Act, which protects blockchain developers from being classified as money transmitters.
  • Law enforcement groups worry that broad exemptions could make it harder to crack down on illegal activity, enforce anti-money laundering rules, and prosecute criminals.
  • The Alliance to End Human Trafficking warns that the provision could weaken oversight of money flows tied to human trafficking and organized crime.

The CLARITY Act, a major U.S. bill for digital assets, is facing pushback from two coalitions worried about Section 604, also known as the Blockchain Regulatory Certainty Act. This provision gives blockchain software developers a safe harbor by saying they are not considered money transmitters as long as they do not control transactions. While the goal is to protect programmers, critics fear it could also end up shielding criminals by accident.

Law Enforcement Pushback

A group representing more than 70,000 prosecutors, sheriffs, and police chiefs, including the National District Attorneys Association and the International Association of Chiefs of Police, sent a letter to the U.S. Department of Justice and the White House crypto adviser. They warned that the broad exemptions in Section 604 could make it harder to investigate and prosecute illegal activity. In their view, regulatory clarity should not come at the expense of transparency, accountability, and victim protection. They also raised concerns about other parts of the CLARITY Act that could weaken anti-money laundering measures, especially for services like mixers, tumblers, and certain DeFi platforms.

Catholic Coalition Fears Link to Human Trafficking

At the same time, the Alliance to End Human Trafficking, a network of Catholic sisters and activists, sent a letter to leaders in the U.S. Senate. They stressed that the exemptions in Section 604 could make it harder to monitor financial flows tied to human trafficking, organized crime, and other forms of abuse. This coalition is calling for the provision to be reconsidered before the bill moves forward.

The Complexity of Developer Protections

Section 604 is meant to protect developers who are not directly involved in initiating transactions from liability as money transmitters. The idea is to encourage innovation and development in the blockchain sector without making developers worry about legal fallout. But the concern is that this protection may be too broad and could make abuse easier. It is still unclear whether negotiators will be able to refine the provision so it offers enough protection without undermining law enforcement and regulatory oversight.

This debate ties into the broader push to protect developers without accidentally treating open-source builders as money transmitters. The outcome could affect international regulation and shape how developers are protected, or held accountable, around the world.

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