Crypto news

Four leading U.S. law enforcement associations have sent a joint appeal to the Department of Justice and the White House administration, sharply criticizing Section 604 of the CLARITY Act. In their view, this provision creates dangerous gaps in the financial oversight system and significantly complicates the investigation of crimes involving digital assets.

The core essence of Section 604 is to legislatively establish that developers of non-custodial wallets and similar infrastructure participants should not be considered money transmitters. The key condition is that they do not gain control over user funds. At first glance, this is a reasonable clarification aimed at protecting innovation and decentralized projects.

However, as experts from the law enforcement community note, the wording of the exemption is too broad. It could unintentionally provide legal protection to network participants who actually facilitate the movement of crypto assets, including potentially illegal transactions. This refers to services that, while not being custodians, actively participate in routing and processing transfers.

Law enforcement officials fear that after the passage of the CLARITY Act, many services currently in a "gray area" will gain full legitimacy, and investigators will lose an important leverage tool. Investigations into money laundering, terrorist financing, and other serious crimes involving cryptocurrencies could face new legal barriers.

From my professional perspective, this situation demonstrates a classic conflict between the need for regulation to protect users and the need for clear rules to develop the DeFi sector. A compromise here is extremely difficult: overly strict regulation will stifle innovation, but overly lenient regulation will create a haven for criminals. Section 604 in its current form appears to have tipped the scales in favor of the latter, requiring immediate adjustment by lawmakers.