Catholic groups challenge Clarity Act safeguards in U.S. crypto bill debate

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Catholic groups on crypto bill

Highlights

Alliance to End Human Trafficking, backed by Catholic groups, urges Senate leaders to amend Section 604 of the Clarity Act, citing risks to crime oversight.
Section 604 would exempt non-custodial crypto developers from money transmitter laws, prompting concerns over potential hindrance to trafficking, sanctions, and exploitation investigations.
Digital Chamber CEO Cody Carbone argues Section 604 offers legal certainty for non-custodial developers, intensifying debate in Washington over innovation versus anti-crime safeguards.

Senate lobbying targets Section 604

As reported by The Block, the Alliance to End Human Trafficking sends a letter on Tuesday to Senate Majority Leader John Thune and Senate Democratic Leader Chuck Schumer arguing that Section 604 of the Clarity Act could make it harder to oversee criminal activity involving digital assets.

The group, backed by Catholic organizations, says the provision, also known as the Blockchain Regulatory Certainty Act, creates a safe harbor for non-custodial developers by clarifying that they are not money transmitters. In the letter, the signatories say the change could hinder law enforcement efforts to investigate and prosecute crypto-related crime, including activity tied to trafficking, organized crime, child exploitation and sanctions evasion.

The letter says the Catholic Church supports responsible financial innovation, but argues that market development should not come at the expense of public accountability and protections for vulnerable people. Signatories include leaders from the Sisters of Saint Joseph of Philadelphia, Sisters of the Blessed Virgin Mary and the Congregation of Sisters of St. Agnes.

Crypto industry argues legal clarity is needed

Supporters of the measure in the digital asset industry say Section 604 provides needed legal certainty for software developers and helps keep innovation from moving offshore. That position has made the provision a central flashpoint as lawmakers try to advance broader U.S. crypto legislation.

Digital Chamber Chief Executive Officer Cody Carbone pushes back against the criticism in a post on X, saying Section 604 applies to non-custodial developers rather than entities that handle customer funds like banks. The exchange highlights a wider policy divide in Washington over how to balance crypto innovation with anti-money laundering enforcement and trafficking safeguards.

U.S. authorities’ crackdown on Huione Group-linked crypto laundering infrastructure highlighted how cyber-enabled fraud networks move illicit digital-asset proceeds into the traditional banking system. Our earlier article detailed actions including the seizure of backend infrastructure and FinCEN measures designed to cut off suspected laundering channels tied to scams and other organized criminal activity. The update underscored the broader push to curb crypto-related crime amid rising victim losses.

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