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Crypto industry group pushes back on sheriffs' warning over CLARITY Act safe harbor

Crypto industry group pushes back on sheriffs' warning over CLARITY Act safe harbor

The bill faces fresh scrutiny as the Wall Street Journal Editorial Board urges changes to stablecoin and AML provisions before Senate passage.

Fact Check
The Blockchain Association's own primary letter (PDF) directly confirms the claim: it rebuts the National Sheriffs' Association, states the Clarity Act does not create blanket/broad exemptions for DeFi from AML/sanctions laws, and argues non-controlling (non-custodial) software developers should not be treated as regulated financial intermediaries. The Block's news report independently corroborates that the Association sent this rebuttal to Senate leaders. Both sources are consistent with every element of the claim.
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Summary

The debate over the Digital Asset Market Clarity Act widened again after the Wall Street Journal Editorial Board said the legislation would give the crypto industry long-sought regulatory certainty but should be tightened before passage because of potential risks to the U.S. financial system. The editorial praised the bill for drawing clearer lines between digital assets overseen by the Securities and Exchange Commission and those falling under the Commodity Futures Trading Commission, and said it could provide legal certainty for companies, investors and banks while supporting broader adoption of tokenized securities. The board argued, however, that the bill could create a loophole allowing crypto exchanges to offer rewards to stablecoin holders even though the GENIUS Act bars issuers from paying interest. It also warned that such incentives could pull deposits away from traditional banks and raised concerns that exemptions for some decentralized networks from anti-money laundering and know-your-customer rules could create openings for illicit finance. The editorial said lawmakers should tighten the language before sending the measure to President Donald Trump's desk. The criticism drew swift pushback from crypto advocates. DeFi Education Fund CEO Neeraj Agrawal rejected the editorial's description of decentralized networks, writing on X, "This is completely wrong. There is no operator. That's the point." Blockchain Association CEO Ji Kim called the piece "rife with factual and legal inaccuracies" and said a detailed rebuttal was coming, while SkyBridge Capital founder Anthony Scaramucci described it as a "last-minute effort to stall things" by the banking lobby. The new criticism adds to an already crowded fight around the bill's decentralized finance provisions. The Blockchain Association has also challenged claims from the National Sheriffs' Association that Section 10604, the Blockchain Regulatory Certainty Act safe harbor for non-custodial developers, would weaken financial-crime enforcement. The issue comes as Senate Republicans push to pass the Clarity Act before the August recess even as disputes over ethics, DeFi carve-outs and other late-stage concerns remain unresolved.

Terms & Concepts
  • anti-money laundering (AML): Rules and controls designed to detect and prevent the movement of illicit funds through the financial system.
  • know-your-customer (KYC): Identity-verification procedures financial firms use to confirm who their customers are and assess risk.
  • safe harbor: A legal provision that shields defined conduct from certain penalties or liability.