Key Takeaways:
Four US law enforcement organizations representing 70,000 professionals have joined Catholic anti-trafficking advocates in opposing the CLARITY Act.
Four US law enforcement organizations sent letters to the White House on June 23 opposing Section 604 of the CLARITY Act, arguing the provision would create oversight gaps that hinder illicit activity investigations.
"Regulatory certainty should not come at the expense of accountability, transparency, victim protection, or public safety," the National District Attorneys Association, National Association of Assistant United States Attorneys, International Association of Chiefs of Police and National Sheriffs' Association said in a joint letter to Acting Attorney General Todd Blanche and White House digital assets adviser Patrick Witt.
Section 604, also known as the Blockchain Regulatory Certainty Act, protects non-custodial software developers, open-source contributors and certain DeFi infrastructure from being automatically classified as money transmitters. The law enforcement groups said the exemptions could weaken Know-Your-Customer and Anti-Money-Laundering requirements compared with traditional finance, potentially shielding mixers, tumblers and other tools used to move digital assets. The Alliance to End Human Trafficking, founded by US Catholic Sisters, sent a separate letter to Senate leaders flagging the same provision as a risk to monitoring trafficking-related financial activity.
The opposition arrives as the CLARITY Act faces a narrowing legislative window. The bill cleared the Senate Banking Committee in May on a 15-9 vote and is set for a House Financial Services Committee field hearing on July 17 in New York. With Republicans holding 53 seats and 60 votes needed to invoke cloture, the bill requires at least seven Democratic crossovers — and only two have publicly supported it so far. Senator Cynthia Lummis has set end of July as a hard deadline, warning that missing the pre-recess window could delay enforceable digital asset market structure rules until 2030.
Lindsay Fraser, chief policy officer at the Blockchain Association, pushed back against the law enforcement interpretation. "Section 604 does one narrow thing," she said. "It prevents non-custodial software developers from being misclassified as money transmitters when they do not custody assets or control transactions. It does not immunize criminals."
Lummis echoed that defense, stating that "regulatory ambiguity doesn't just hurt builders. It helps criminals. The CLARITY Act closes the gaps bad actors exploit." She added that "writing code is not money transmission" — a distinction she said "will matter for a generation of builders."
The House passed the CLARITY Act in July 2025 by 294-134, with dozens of Democrats supporting it. But the Senate path remains uncertain. Galaxy Research has pegged passage odds at roughly 60%, noting the window "effectively closes" once the August recess begins. If the bill misses the pre-recess window, the next viable legislative opening is 2027 at the earliest.
The July 17 field hearing in New York, titled "Building the Future of Finance: How the CLARITY Act Unlocks Innovation," will serve as a platform for both sides. The hearing is not a vote — the House already passed its version — but it will test whether the industry can sustain momentum as law enforcement opposition crystallizes around Section 604.
This article is for informational purposes only and does not constitute investment advice.
