Law Enforcement, Catholic Groups Send Letters to U.S. Government Warning CLARITY Act Would Create Crypto Crime Loopholes

Bitcoin Magazine

Law Enforcement, Catholic Groups Send Letters to U.S. Government Warning CLARITY Act Would Create Crypto Crime Loopholes

A coalition of four major law enforcement organizations and a separate group of nearly 100 Catholic leaders sent letters Tuesday warning that a provision in the Digital Asset Market Clarity Act would weaken the oversight tools investigators and prosecutors rely on to combat financial crime. 

The law enforcement letter, addressed to Acting Attorney General Todd Blanche and Patrick Witt, executive director of the President’s Council of Advisors for Digital Assets, came from the National District Attorneys Association, the National Association of Assistant United States Attorneys, the International Association of Chiefs of Police, and the National Sheriffs’ Association. 

Together, the groups represent more than 70,000 prosecutors, sheriffs, chiefs of police, investigators, and other law enforcement professionals.

Their central concern is Section 604 of the bill — a provision that incorporates the Blockchain Regulatory Certainty Act, or BRCA, which would establish that a developer or infrastructure provider who cannot move or control a user’s digital assets is not a money transmitter under federal law. 

Proponents argue the language is essential to protect software developers from criminal prosecution. Law enforcement groups counter that the exemptions are too broad.

“As currently drafted, Section 604 risks creating gaps in oversight and accountability that could impede those efforts,” the groups wrote, adding that their concern is “not with individuals who merely write or publish software code, nor with responsible technological innovation,” but rather with exemptions that could shield actors who facilitate the movement of digital assets while obstructing investigators.

The groups also contend the bill falls short on anti-money laundering and countering the financing of terrorism requirements, pointing out it does not establish suspicious activity monitoring and reporting obligations comparable to those applied to traditional financial intermediaries. They warned that certain provisions could exempt mixers, tumblers, and some decentralized finance businesses from AML and know-your-customer requirements.

The other letter, sent to Senate Majority Leader John Thune and Senate Democratic Leader Charles Schumer, carried signatures from roughly 80 organizations and leaders, including the Alliance to End Human Trafficking, the Jesuit Conference’s Office of Justice and Ecology, and dozens of Catholic sisters and survivor advocates.

“Human traffickers are quick to exploit new technologies when oversight fails to keep pace,” the groups wrote, arguing that the bill’s regulatory gaps could make it harder to trace financial flows tied to trafficking, child exploitation, and organized crime.

Background: What the CLARITY Act would do

H.R. 3633, the Digital Asset Market Clarity Act, is the most significant piece of crypto legislation to advance in Congress in years. The House passed it 294-134 in July 2025. The Senate Banking Committee cleared the bill 15-9 in May 2026, placing it on the Senate Legislative Calendar eligible for a floor vote.

The bill divides oversight of digital assets between the Securities and Exchange Commission and the Commodity Futures Trading Commission, creating a framework for crypto exchanges, brokers, stablecoin issuers, and DeFi participants. 

The Trump administration has made the legislation a priority, and crypto industry groups have pushed to keep Section 604’s developer protections intact.

To advance in the Senate, the bill needs 60 votes — a threshold that gives moderate Democrats significant leverage. Senators Mark Warner of Virginia and Catherine Cortez Masto of Nevada have both tied their support to law enforcement’s sign-off on Section 604, making the opposition letters a direct threat to the bill’s prospects.

Yesterday, Congress scheduled a July 17 hearing in New York on the CLARITY Act, a major crypto market structure bill that would divide oversight between the SEC and CFTC, as lawmakers push toward potential passage later this year.

This post Law Enforcement, Catholic Groups Send Letters to U.S. Government Warning CLARITY Act Would Create Crypto Crime Loopholes first appeared on Bitcoin Magazine and is written by Micah Zimmerman.