Bipartisan Senators Warn Crypto Bill Could Weaken Money Laundering Enforcement
Senate Judiciary leaders Chuck Grassley and senators have warned {that a} provision in Senate Banking Chair Tim Scott’s crypto invoice may curtail regulation enforcement’s potential to prosecute cash laundering and different illicit monetary crimes.
The provision would exempt sure blockchain software program builders from monetary licensing necessities.
According to Politico, Grassley and Durbin wrote in a private letter to Scott and rating member Elizabeth Warren that Section 604 of the crypto market construction laws “falls squarely throughout the Judiciary Committee’s jurisdiction,” including that their panel “was not consulted” in regards to the language forward of a since-postponed markup.
The part mirrors the Blockchain Regulatory Certainty Act, bipartisan laws led by Senator Cynthia Lummis and Senator Ron Wyden.
Law Enforcement Warns of Prosecution Gaps
The disputed provision exempts “a dangerously broad class of actors” from felony regulation therapy, based on the Grassley-Durbin letter.
They warned it will have “probably precluded the federal government from bringing prices towards” the founder of Tornado Cash, a crypto mixer platform prosecutors mentioned was used to launder cash.
A co-founder of the platform was found guilty of working an unlicensed cash transmitting enterprise final 12 months, although crypto proponents and congressional Republicans have decried the conviction.
“Such a niche dangers attracting illicit actors—like cartels and different refined felony organizations—to decentralized platforms,” the letter said.
The National Association of Assistant United States Attorneys additionally echoed issues, writing that the invoice would “materially restrict prosecutors’ potential to pursue monetary crime instances involving the motion of funds outdoors established regulatory frameworks.“
A committee spokesperson for Scott defended the supply, stating the South Carolina Republican “stays dedicated to defending software program builders whereas making certain that regulation enforcement has the mandatory instruments to prosecute precise unlawful cash transmission operations.“
The parliamentarian has dominated that the Blockchain Regulatory Certainty Act falls squarely throughout the Banking Committee’s jurisdiction, based on spokesperson Jeff Naft.
Developer Protections Collide With Financial Crime Concerns
The debate facilities on decentralized finance platforms that use software program to facilitate buying and selling and lending with out centralized intermediaries.
Democratic senators negotiating with Republicans have raised issues about DeFi getting used for illicit finance and pushed for modifications to the developer exemption language.
They had been making ready to attempt to amend it throughout a markup earlier than the session was postponed.
GOP crypto allies preserve new exemptions are important for innovation.
“Blockchain builders who’ve merely written code and preserve open-source infrastructure have lived beneath menace of being labeled as cash transmitters for a lot too lengthy,” Lummis said when introducing the standalone BRCA.
“This designation is mindless once they by no means contact, management, or have entry to consumer funds, and unnecessarily limits innovation.“
The Solana Policy Institute additionally just lately asked the SEC to grant specific exemptions for builders of open-source, non-custodial software program, arguing that present frameworks constructed round centralized intermediaries don’t match smart-contract-based methods through which customers retain custody of their belongings.
In DeFi methods, customers retain custody of their belongings, approve their very own transactions, and work together straight with public blockchains with out the software program holding funds or exercising discretion.
SEC Chairman Paul Atkins has criticized the company’s previous reliance on regulation by enforcement, arguing that “engineers shouldn’t be topic to securities legal guidelines” merely for publishing code.
Commissioner Hester Peirce has equally said that regulators mustn’t impose obligations on builders who don’t custody belongings or override consumer choices.
Thousands of Developers Face Regulatory Uncertainty
The end result impacts 1000’s of blockchain builders throughout ecosystems.
Ethereum added 16,181 new developers from January to September 2025 alone, sustaining 31,869 complete lively builders, whereas Solana added 11,534 new builders and grew its developer depend 83% year-over-year to succeed in 17,708 lively contributors.
Bitcoin ranked third with 7,494 new builders and 11,036 complete lively contributors.
For now, Scott has postponed the Banking Committee markup following Coinbase’s withdrawal of support for the broader market construction invoice.
Senate units January 27 crypto invoice markup as banking foyer secures stablecoin yield limits and Democrats demand White House ethics guardrails.#Senate #Banking #CryptoBillhttps://t.co/iK8utlKRhr
— Cryptonews.com (@cryptonews) January 14, 2026
Coinbase CEO Brian Armstrong called the most recent draft “catastrophic,” citing issues over DeFi restrictions, tokenized fairness bans, and stablecoin yield limitations.
“We’d fairly don’t have any invoice than a nasty invoice,” Armstrong wrote, whereas expressing hope for a greater compromise.
Galaxy Digital additionally warned the invoice may grant Treasury “Patriot Act–type” surveillance powers, together with authority to freeze transactions for as much as 30 days with out court docket orders and label international jurisdictions or transaction classes as money-laundering issues.
The legislative path stays unsure as lawmakers try to steadiness developer protections with regulation enforcement capabilities whereas navigating trade opposition and jurisdictional disputes between Senate committees.
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