Norbert J. Michel, Ryan Chan-Wei, and Nicholas Anthony
The Blockchain Regulatory Certainty Act has proven one of the most contentious aspects of the Digital Asset Market Clarity Act (Clarity Act) and remains a major sticking point as lawmakers on both sides work to push the larger bill across the finish line.
Incorporated into the Clarity Act as Section 604, the Blockchain Regulatory Certainty Act would stop the federal government from treating software developers as money transmitters. To do so, it would establish a rightful distinction between those who provide financial services and those who write the software underpinning those services. We have criticized other aspects of the Clarity Act, particularly its expansion of financial surveillance, but the Blockchain Regulatory Certainty Act represents good policy.
Clarity on Clarity
In essence, Section 604 specifies that a developer or provider who cannot move or control a user’s assets would not be regulated as a money transmitter merely for writing and maintaining blockchain software. This section recognizes that offering tools that let people hold their own keys or operate a network is vastly different from acting as a banker or broker. This seems self-evident, but detractors, such as Senator Catherine Cortez Masto (D‑NV), have warned that Section 604 would make it harder to trace and prosecute criminals who use digital assets, a concern shared by the law enforcement officials who publicly opposed the measure.
However, this objection misunderstands what the provision changes.
Section 604 is about regulatory classification (i.e., whether a person must register as a money transmitter), and it leaves the criminal law against moving illicit money in force because it preserves the statutory basis for federal prosecutors to go after anyone who knowingly handles funds criminal in origin or purpose.
Furthermore, Section 604 is consistent with the Department of Justice’s (DOJ) stated position. In August 2025, then-Acting Assistant Attorney General Matthew Galeotti said that where software is genuinely decentralized, no charge for unlicensed money transmission should follow in the absence of criminal intent. As he put it, “merely writing code, without ill intent, is not a crime.” Section 604 codifies that common-sense principle.
The dangerous impulse to treat developers as regulated financial institutions, obliged under the Bank Secrecy Act to monitor their users and report them to the government, stems from a dysfunctional system in desperate need of reform. As one of us recently explained while testifying before Congress, the Bank Secrecy Act compelled financial institutions to file 28.7 million reports on their customers in a single year, at an estimated cost of $59 billion, and generated leads for only 275 Internal Revenue Service investigations. Most of those filings describe nothing more sinister than a customer whose paperwork did not quite add up.
Extending the same regime to people who never hold a cent of anyone’s money would multiply cost and surveillance without reaching a criminal that the law cannot already touch.
Unintended Consequences
The deeper irony is that removing Section 604 would make crime harder to police. Threaten every developer with treatment as an unlicensed money transmitter, and many will move offshore. The American share of open-source blockchain developers has already fallen from 25 percent in 2021 to 18 percent in 2025, and this number will likely drop much further if Section 604 does not prevent developers from being treated as money transmitters.
However, activity that remains onshore is much more visible to investigators, and Section 604 therefore helps rather than hinders law enforcement efforts. Patrick Witt, the Executive Director of the President’s Council of Advisors for Digital Assets at the White House, has made clear that the Clarity Act is ultimately a “pro-law enforcement bill.” Additionally, when the Clarity Act is viewed holistically, Section 604 is complemented by many other provisions that enhance law enforcement capabilities, as described in a recent letter to the Senate signed by 160 former national security, intelligence, and law enforcement officials.
It is frankly perplexing that this matter is still up for debate. It should not be controversial that software development is not the same as operating as a regulated money transmitter.
Representative Tom Emmer (R‑MN), who first introduced the Blockchain Regulatory Certainty Act in 2018, is fully justified in dismissing criticism of Section 604 on law enforcement grounds as a “red herring.” As the midterms near and Senate negotiations inch along, a new political action committee has been formed to advance the policy articulated in Section 604. This position should be welcomed, as protecting developers is a wise policy approach that will bolster American innovation.
