Clarity Act Faces New Heat as Police Groups Flag Crypto Probe Risks

TLDR

• U.S. law enforcement groups warned that Section 604 of the Clarity Act could hinder crypto crime investigations.
• The groups said broad exemptions may shield entities that help move digital assets from regulatory accountability.
• The letter was sent to the Department of Justice and the White House on Tuesday.
• Four national law enforcement organizations signed the letter, including prosecutors, police chiefs, and sheriffs.
• Catholic leaders also criticized Section 604, warning it could weaken safeguards against human trafficking.

U.S. law enforcement groups warned that the Clarity Act could weaken crypto crime investigations if lawmakers keep Section 604 unchanged. The groups raised concerns in a letter to the Justice Department and White House. They said exemptions could limit oversight of firms that help move digital assets.

Clarity Act Faces Law Enforcement Pushback

The National District Attorneys Association joined three groups on the letter. They included federal prosecutors, police chiefs, and sheriffs from national organizations.

The groups said they did not oppose software writers or responsible innovation. However, they argued that the bill could protect actors who help crypto assets move.

They also said Section 604 could create barriers for prosecutors and investigators. The groups argued that the language could reduce accountability in digital asset markets.

The groups said other bill provisions could affect anti-money laundering rules. They said those provisions could reduce transparency and create gaps.

Section 604 has drawn the sharpest criticism in debate. Law enforcement groups focused on its safe harbor language for non-custodial developers.

That section also carries the name Blockchain Regulatory Certainty Act. It started as a separate bill before lawmakers folded it into the Clarity Act.

Crypto Crime Probe Concerns Grow Over Section 604

The Blockchain Regulatory Certainty Act would clarify that non-custodial developers are not money transmitters. Supporters say it protects developers who do not control customer funds.

Law enforcement groups took a different position in their letter. They said the carveout could hinder cases tied to crypto crime.

Catholic leaders raised similar concerns in a statement Tuesday. Nearly 100 leaders said the bill could weaken safeguards against human trafficking.

Their criticism also focused on Section 604 and its effect on enforcement. They argued that crime networks could benefit from weaker oversight.

The White House defended the wider bill through Patrick Witt, its crypto adviser. He called the Clarity Act a “pro-regulatory, pro-enforcement bill.”

Witt said the United States must set standards as money moves faster worldwide. “If we are not setting standards,” he said, others will shape the rules.

The latest letter leaves Section 604 at the center of the policy fight. Justice Department and White House officials received the warning on Tuesday.

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