CLARITY Act Gains Steam as Law Enforcement Group Drops Opposition

Section 604 has been the flashpoint. It addresses regulatory treatment of non-custodial software developers and distributed ledger service providers. Law enforcement groups including the Fraternal Order of Police and the National Sheriffs’ Association have argued the provision could make it harder to prosecute financial crimes involving cryptocurrency, potentially exempting certain mixers, tumblers, and decentralized finance activities from money transmission rules.

Supporters of Section 604 say it preserves criminal liability for individuals who knowingly facilitate illicit transactions while protecting developers who do not control customer funds.

MCSA said local agencies investigate many digital asset-related crimes and should help shape future regulatory recommendations. It also called for increased funding for training, blockchain forensic tools, and investigative resources. The group warned that digital assets are increasingly used in fraud, ransomware, narcotics trafficking, child exploitation, organized retail theft, and terrorism financing.

Investor Mark Chadwick said MCSA's earlier opposition had been viewed as a hurdle in the Senate. Its shift to neutral could ease law enforcement concerns and improve the bill's chances of passage.

The Senate Banking Committee has not yet scheduled a markup of H.R. 3633.