U.S. Law Enforcement Groups Say CLARITY Act Provision Could Undercut Crypto Enforcement

Four U.S. law enforcement organizations are urging the Trump administration to revisit a key section of the Digital Asset Market Clarity Act, warning the measure could weaken oversight of crypto activity and complicate investigations. In a June 23 letter to Acting Attorney General Todd Blanche and Patrick Witt, executive director of the President's Council of Advisors for Digital Assets, the National Sheriffs' Association, the National Association of Assistant U.S. Attorneys, the National District Attorneys Association, and the International Association of Chiefs of Police said they remain concerned about Section 604, often referred to as the Blockchain Regulatory Certainty Act. The groups said they represent more than 70,000 prosecutors, sheriffs, police chiefs, investigators, deputies, and officers nationwide. They argued that the current language could create accountability gaps, making it harder to pursue illegal activity. They also said the bill does not include safeguards common in traditional finance and warned some crypto participants could sidestep certain anti-money laundering and know-your-customer reporting requirements. The letter comes after weeks of discussions among the administration, lawmakers, and the crypto industry. Section 604 has become one of the most contentious elements ahead of a Senate floor vote. Two organizations involved in negotiations—the Grand Lodge Fraternal Order of Police and the National Association of Police Organizations—did not sign the letter. Catholic groups also pressed Senate leaders on the same provision. The Alliance to End Human Trafficking, supported by Catholic organizations, said it collected backing from about 100 Catholic leaders and groups and warned that Section 604 could make it more difficult to trace funds tied to human trafficking, organized crime, child exploitation, sanctions evasion, and other illicit activity. Signatories included leaders from the Sisters of Saint Joseph of Philadelphia, the Sisters of the Blessed Virgin Mary, and the Congregation of Sisters of St. Agnes. The Alliance said a safe harbor for noncustodial software developers could be interpreted broadly and erode oversight. Crypto industry advocates continue to defend Section 604, arguing that noncustodial developers build software and should not be regulated like banks or money transmitters. Supporters say the provision would provide legal certainty and help keep innovation from moving offshore. Many industry leaders have described Section 604 as a red line and warned that removing it could weaken support for the broader legislation. The CLARITY Act is designed to end the long-running jurisdictional dispute between the SEC and the CFTC over digital asset regulation. It would classify many tokens—including Bitcoin and Ethereum—as commodities and establish registration requirements for exchanges and brokers. The House passed the bill in July 2025 by a 294–134 vote. The Senate Banking Committee advanced it in May 2026 by a 15–9 margin. Disclaimer: This content is provided for informational and educational purposes only and does not constitute financial advice. The publisher is not responsible for losses related to the use of any products, services, or information referenced. Readers should exercise caution before taking any action related to the company.