Two coalitions escalated pressure on the CLARITY Act this week, sending letters raising concerns about Section 604, the digital-asset bill’s developer safe harbor.

Law enforcement organizations said their core concern remains unresolved. A Catholic anti-trafficking network went further, urging Senate leaders to reexamine the provision before the bill advances.

Why CLARITY Act’s Section 604 Has Become the Flashpoint

Section 604 is the Blockchain Regulatory Certainty Act. It says a “non-controlling” developer or provider is not a money transmitter merely for writing software or supporting blockchain infrastructure.

It preserves liability for anyone knowingly transferring criminal proceeds and keeps existing anti-money-laundering authorities intact. Supporters, therefore, call it a fix that protects coders, not criminals.

Critics see broader risk, arguing that the provision may create challenges for authorities seeking to investigate and prosecute illicit actors.

Two Coalitions, One Target

The first letter came from groups representing more than 70,000 prosecutors, sheriffs, and officers. The National District Attorneys Association, NAAUSA, the International Association of Chiefs of Police, and the National Sheriffs’ Association signed it.

Addressed to Acting Attorney General Todd Blanche and White House crypto adviser Patrick Witt, the letter warns that broad exemptions could shield facilitators of illicit movement. 

“Regulatory certainty should not come at the expense of accountability, transparency, victim protection, or public safety,” the letter reads.

The letter also argued that concerns extend beyond Section 604. The group warned that several provisions in the CLARITY Act could weaken transparency and accountability while creating gaps in AML/CFT safeguards that law enforcement relies on to combat financial crime, protect victims, and support national security.

“In particular, the bill does not establish a comprehensive set of safeguards commonly applied to other financial intermediaries… At the same time, certain provisions may exempt or exclude categories of participants—including mixers, tumblers, and some decentralized finance (DeFi) businesses—from appropriate regulatory obligations despite the role such services can play in facilitating the movement or concealment of illicit funds,” the group added.

Meanwhile, the second letter came from the Alliance to End Human Trafficking, a network of Catholic sisters and advocates. Addressed to Senate leaders John Thune and Charles Schumer, it ties Section 604 to trafficking and money-laundering risks.

“We are particularly concerned that certain provisions under Section 604 could create broad carveouts and regulatory ambiguities that may make it more difficult to responsibly monitor illicit financial activity tied to trafficking, organized crime, child exploitation, sanctions evasion, and other forms of abuse,” the alliance stated.

The dual pressure tests whether negotiators can narrow Section 604 enough to win the Democratic votes the bill still lacks.

Source: BeInCrypto