The Blockchain Association fired back at law enforcement on August 3, sending an eight-page letter to Senate leaders that directly challenged the National Sheriffs' Association's concerns about the CLARITY Act. The industry group defended protections written into Section 10604, which shields noncontrolling software developers from being classified as money transmitters simply for writing code.
The sheriffs had raised objections just days earlier, on July 31, arguing that developer provisions in the July 22 draft of H.R. 3633 were too broad and could hamper criminal investigations. They wanted Congress either to strip out Section 10604 entirely or sharply limit its scope. The National Sheriffs' Association also pushed for regulating any entity that takes income from the digital asset market, a standard the Blockchain Association now flatly rejected.
How the Act Actually Works
The core dispute hinges on what makes someone a regulated financial institution. The Blockchain Association pointed to FinCEN guidance from 2019, which assesses money transmitter status on a case-by-case basis depending on the actual functions performed. The CLARITY Act follows that same logic, regulating entities based on whether they exercise control over customers' funds or transactions, not on whether they make revenue from crypto. A developer writing open-source software, operating self-custody tools, or building technical infrastructure stays unregulated as long as they lack legal authority and unilateral ability to touch users' assets.
The association emphasized that safeguards for developers actually preserve criminal enforcement and sanctions compliance. According to the letter sent to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer, law enforcement retains full authority to pursue money laundering, terrorist financing, and sanctions violations. The protections simply prevent developers from facing charges for code they wrote when they have no control over how funds move. The Financial Action Task Force standards cited by the association rely on the same principle. Whether someone qualifies for protection depends on performing covered services for another party, not on earning a paycheck.
This is informational material about legislative developments in crypto regulation, not financial advice or a recommendation to take any action.
