On Friday, the U.S. Senate Banking Committee unveiled its latest draft of the CLARITY Act, introducing significant amendments to the regulation of cryptocurrency developers. A primary focus of the draft is an amendment to 18 U.S. Code § 1960(a), which proposes that only those crypto developers or providers who “knowingly exercise control over currency, funds, or other value that substitutes for currency” should be categorized as money transmitting businesses. This change aims to clarify regulatory definitions and potentially alleviate burdens on a broader range of developers in the cryptocurrency space.
One notable aspect of the draft is its retroactive applicability. Section 501 of Title V, titled “Protecting Software Developers and Software Innovation,” explicitly states that “this section, and the amendments made by this section, shall apply to conduct occurring before, on, or after the date of enactment of this Act.” If incorporated into the final legislation, this could provide significant legal protections to developers like Roman Storm, a key figure behind Tornado Cash, who was recently found guilty of operating an unlicensed money transmitting business. Storm has indicated intentions to appeal his conviction, and should the CLARITY Act become law with the retroactive protections in place, it is believed his legal team would have a solid case for overturning the verdict.
However, the retroactive protections would not extend to all developers. For instance, the Samourai Wallet developers previously accepted a plea deal for similar charges in July, meaning they would not benefit from this forthcoming legislative change.
In addition to these protective measures, the latest draft also defines parameters for “non-controlling” or noncustodial crypto technology developers. These developers, who create software or hardware enabling users to manage and secure their own digital assets without the developer’s control, will similarly be exempt from being classified as money transmitting businesses under 31 U.S. Code § 5330. This exemption would also take effect retroactively, reinforcing concerns that regulatory clarity is crucial for fostering innovation in the space.
Looking ahead, the U.S. Congress is set to return to session on September 2, 2025, with the Senate Banking Committee indicating that it will continue to prioritize discussions around the CLARITY Act. A spokesperson noted that the draft reflects extensive input from various stakeholders within the cryptocurrency industry, emphasizing a commitment to creating legislation that balances investor protection with the promotion of innovation. As of now, there are no scheduled hearings on the committee’s calendar for this bill.
