Protecting developers or weakening regulation? Section 604 of the CLARITY Act faces strong opposition from the Judiciary Committee

BlockBeats News, January 17 — The head of the U.S. Senate Judiciary Committee stated in a letter to the Senate Banking Committee that the “Blockchain Regulatory Certainty Act” would weaken federal regulations on money transfer oversight and should not be included in legislation related to the crypto market structure.

In the letter, Republican Chairman of the Judiciary Committee Chuck Grassley and senior Democratic Senator Dick Durbin wrote that Section 604 of the Banking Committee’s Market Structure Act — which aims to protect software developers from criminal liability due to third-party misuse of their products — will “weaken” federal laws concerning unlicensed money transfer businesses. “The Senate Judiciary Committee (which has jurisdiction over Title 18 of the U.S. Code) was not consulted, nor was it given the opportunity for substantive review of the proposed changes in advance.”

The letter cites the Department of Justice’s prosecution of Tornado Cash developer Roman Storm, claiming that the case demonstrates that prosecutors have sufficiently argued the importance of holding accountable those involved in unlicensed money transfer activities under current regulations. This letter is another blow to the market structure bill, which was scheduled for debate and a vote by the Senate Banking Committee on Thursday but was canceled on Wednesday evening amid growing opposition.

If this section remains in the bill, the Judiciary Committee (which handles legal matters) will need to sign off as the third committee on the overall proposal, adding a new layer of complexity to the legislative process. DeFi advocates insist that without these specific protections, they may withdraw their support, signaling another difficult deadlock.

The letter emphasizes: “Therefore, we urge the committee to reject any proposed provisions that could weaken the government’s ability to hold accountable those involved in unlicensed money transfer activities, including Section 604.”