US Senate Judiciary Committee leaders are pushing to strip crypto developer protections from a sweeping digital asset market structure bill, warning that the current draft could undermine existing laws aimed at combating illicit finance.
In a letter sent Wednesday to Senate Banking Committee leaders, Judiciary Committee Chair Charles Grassley and the panel’s top Democrat, Richard Durbin, raised concerns that provisions shielding certain crypto developers would weaken enforcement of unlicensed money transmitting laws. The letter was first reported by Politico on Friday.
Judiciary Committee warns of enforcement gaps
Grassley and Durbin argued that the bill, as currently written, would “create a significant enforcement gap for decentralized digital asset platforms.”
“Such a gap risks attracting illicit actors — like cartels and other sophisticated criminal organizations — to decentralized platforms,” the senators said in the letter.
They added that the legislation could complicate prosecutions involving illegal financial activity.
“Criminals already use tactics to obscure unlawful transactions. This bill would make prosecuting this conduct even more difficult,” they wrote.
The warnings reflect long-standing concerns among law enforcement officials that certain segments of the crypto ecosystem could be exploited for money laundering and other crimes if regulatory clarity comes at the expense of oversight.
Dispute centers on crypto developer protections
The controversy centers on language in a draft bill released on Jan. 12 by the Senate Banking and Agriculture Committees, which are jointly working on legislation to define how digital asset markets are regulated in the US.
The draft incorporated elements of the Blockchain Regulatory Certainty Act (BRCA), a proposal designed to clarify that individuals who develop crypto software or maintain decentralized networks are not considered money transmitters under federal or state law.
Supporters of the BRCA language argue that it protects software developers from being subject to financial regulations intended for custodial intermediaries.
However, Grassley and Durbin contend that the provisions could be interpreted too broadly, potentially shielding actors who facilitate illicit transactions.
The Judiciary Committee leaders also objected to the process, saying their panel was sidelined despite having jurisdiction over federal criminal law and the Justice Department.
They wrote that the committee “was not consulted or given the opportunity to meaningfully review the proposed changes in advance.”
They urged the Banking Committee to “reject any proposed language” that would “weaken the government’s ability to hold culpable actors accountable for operating unlicensed money transmitting businesses.”
Legislative path grows more complex
The dispute adds another obstacle to the already complicated path for the crypto market structure bill.
Both the Senate Banking Committee and the Agriculture Committee have delayed planned markups of the legislation in recent weeks as lawmakers attempt to secure broader bipartisan backing.
Even if the bill advances out of both committees, it would face a high hurdle on the Senate floor.
Passage would require 60 votes, meaning Republicans would likely need support from several Democrats in the evenly divided chamber.
Industry support has also shown signs of strain.
Coinbase, one of the most influential crypto lobbyists in Washington, said on Wednesday that it was pulling its support for the bill, citing concerns with multiple provisions.
The company said on Friday, however, that negotiations with lawmakers were ongoing.
The Judiciary Committee’s intervention underscores the delicate balance lawmakers are trying to strike between providing regulatory clarity for the crypto industry and preserving the government’s ability to police financial crime.
As discussions continue, the fate of developer protections appears likely to be a key flashpoint in the bill’s evolution.
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