Blockchain Association Rejects Sheriffs’ Claims That CLARITY Act Would Weaken Crypto Enforcement

Highlights:

• Blockchain Association says the CLARITY Act preserves anti-money laundering rules and existing law enforcement powers.
• The group argues DeFi developers without control of user funds would not automatically face financial regulation.
• Senate leaders may hold an initial CLARITY Act vote before the August recess, though timing remains uncertain.

The Blockchain Association has rejected claims that the Digital Asset Market Clarity Act would weaken anti-money laundering rules and reduce law enforcement powers. In an August 3 letter to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer, the industry group said the National Sheriffs’ Association had misread the bill’s treatment of decentralized finance, software developers and crypto intermediaries.

The letter responded to the sheriffs’ group’s July 31 warning about the CLARITY Act. The National Sheriffs’ Association argued that parts of the proposal could create broad exemptions for DeFi protocols, mixers, cross-chain bridges, user interfaces and software developers. The Blockchain Association rejected that view, stating, “The Clarity Act does none of those things.”

🚨 BLOCKCHAIN ASSOCIATION SENDS LETTER TO SENATE LEADERS THUNE AND SCHUMER PUSHING BACK ON NATIONAL SHERIFFS' ASSOCIATION CLAIMS ABOUT CLARITY ACT

— Blockchain Daily News (@blckchaindaily) August 4, 2026

Blockchain Association Says CLARITY Act Regulates Firms Based on Control

According to the Blockchain Association, the bill would regulate businesses based on the financial services they provide and the control they hold over customer funds or transactions. Crypto exchanges, brokers, dealers, and other customer-facing intermediaries would remain subject to the Bank Secrecy Act. 

These firms would need anti-money laundering and counter-terrorist financing programs. They would also have to identify customers, monitor transactions, report suspicious activity, keep records, and follow sanctions rules enforced by the Office of Foreign Assets Control.

The group also disputed the claim that the bill gives decentralized finance a blanket exemption. It said Section 10301 directs the Securities and Exchange Commission (SEC), working with the Treasury Department, to regulate people who control protocols that only appear decentralized.

A platform could face regulation when a person or group can change its rules, control its operation, restrict users, or provide services such as trading, transaction execution, or custody. However, neutral software developers and infrastructure providers would not automatically be treated as financial institutions when they do not control user assets or transactions.

The Blockchain Association said those protections would not shield criminal conduct. Developers or service providers could still face prosecution for fraud, sanctions violations, money laundering, or operating an unlicensed money-transmitting business.

Bill Includes New Resources for Crypto Investigations

The letter also pointed to proposed resources for law enforcement. Section 10902 would authorize $600 million annually from fiscal 2027 through 2031, providing $3 billion for digital asset investigations, prosecutions, training and blockchain analytics tools.

FinCEN would receive another $30 million per year for five years. The proposal would also create training programs, a Digital Asset Cyber Innovation Center and a Treasury-led task force focused on scams and recovering victims’ funds.

Senate Vote Could Take Place Before August Recess

The dispute comes as Senate leaders consider whether to advance the CLARITY Act before lawmakers leave for the August recess. Bloomberg Government reported on August 3 that Thune still expected an initial Senate vote during the week. “I think market structure we’ll get a vote on. Whether we can get on it or not, we’ll see,” Thune told reporters. However, he acknowledged that the Senate had several other matters to complete within a limited period. 

Thune expects a Clarity Act vote before the Senate leaves town

Senate Majority Leader John Thune (@LeaderJohnThune) said Monday he still expects an initial vote on the Clarity Act before this week's recess, telling reporters "I think market structure we'll get a vote on" while… pic.twitter.com/JD1voFcIEQ

— BSCN (@BSCNews) August 3, 2026

Supporters are seeking an initial procedural vote that could move the crypto market structure bill forward. However, Thune’s comments show that the timing remains uncertain because the Senate must complete other work before the recess.