CLARITY Act Faces Backlash Over Developer Safe Harbor Provision

The CLARITY Act has faced fresh opposition from law enforcement and Catholic coalitions. Two groups, representing more than 70,000 prosecutors, sheriffs, and officers, sent letters to administration officials expressing concerns about Section 604 of the bill.

The section, also known as the Blockchain Regulatory Certainty Act, would exempt developers or providers from being considered money transmitters if they write software or support blockchain infrastructure. However, critics argue that this provision could create challenges for authorities seeking to investigate and prosecute illicit actors.

The National District Attorneys Association, NAAUSA, the International Association of Chiefs of Police, and the National Sheriffs' Association signed a letter warning that broad exemptions could shield facilitators of illicit movement. They also expressed concerns that several provisions in the CLARITY Act could weaken transparency and accountability while creating gaps in AML/CFT safeguards.

The Alliance to End Human Trafficking, a network of Catholic sisters and advocates, sent a separate letter to Senate leaders expressing similar concerns about Section 604. They argued that the provision could create broad carveouts and regulatory ambiguities that may make it more difficult to monitor illicit financial activity tied to trafficking and other forms of abuse.