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

On 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 structure of the crypto market. Senate Judiciary Committee Republican Chairman Chuck Grassley and senior Democratic member Dick Durbin wrote in the letter that Section 604 of the Banking Committee’s Market Structure Act—aimed at protecting software developers from criminal liability due to third-party misuse of their products—would “undermine” 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 to review the proposed changes in advance.” The letter cites the case of the Department of Justice prosecuting Tornado Cash developer Roman Storm, claiming that the case demonstrates that prosecutors have sufficiently argued the importance of holding parties accountable under current regulations for unlicensed money transfer activities. This letter is another blow to the Market Structure Act; the Senate Banking Committee had scheduled debate and a vote on the bill for Thursday but canceled the agenda late Wednesday night amid growing opposition. If this section remains in the bill, the Judiciary Committee (which handles legal matters) will need to sign off on the overall package as the third committee, adding further complexity to the legislative process. DeFi advocates insist that without these specific protections, they may withdraw 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 parties accountable for unlicensed money transfer activities, including Section 604.”