Law Enforcement Groups Warn CLARITY Act Could Weaken Crypto Crime Oversight

Highlights:

• Law enforcement groups warn that Section 604 could weaken crypto crime oversight and enforcement tools.
• The letter says broad exemptions may help criminals avoid AML, KYC, and BSA safeguards.
• Groups support crypto innovation but want strong rules for mixers, tumblers, and DeFi businesses.

U.S. law enforcement groups have warned that parts of the CLARITY Act could weaken key tools used to fight crypto-related crime. In a letter dated Tuesday, the groups raised concerns about Section 604 of the CLARITY Act. The letter was sent to Todd Blanche, Acting Attorney General of the United States, and Patrick J. Witt, Executive Director of the President’s Council of Advisors for Digital Assets.

Advertisement

The letter, shared by journalist Eleanor Terrett on X, focused on how the bill could affect public safety, financial crime investigations, and crypto enforcement. The warning came from four major law enforcement organizations: the National District Attorneys Association, the National Association of Assistant United States Attorneys, the International Association of Chiefs of Police, and the National Sheriffs’ Association.

Together, the groups said they represent more than 70,000 prosecutors, sheriffs, police chiefs, investigators, deputies, officers, and other law enforcement professionals across the United States.

🚨NEW: In a letter to administration officials, a group of four law enforcement organizations say they remain concerned about certain provisions in the Clarity Act, including Section 604 (the Blockchain Regulatory Certainty Act), arguing it would create gaps in oversight and… pic.twitter.com/y8FQ0HKjp0

— Eleanor Terrett (@EleanorTerrett) June 23, 2026

Law Enforcement Supports Innovation but Wants Accountability

The groups said they support responsible crypto innovation and understand the need for clear digital asset rules in the United States. They also said a strong regulatory framework can help support innovation, economic growth, national security, and public safety.

However, their main concern is that Section 604 may create broad exemptions for some crypto-related activities or participants. In simple terms, exemptions can decide who must follow financial crime rules and who may not. Law enforcement groups warned that if these exemptions are too wide, criminals may find new ways to avoid oversight.

The groups made clear that they are not targeting people who only write or publish software code. Their concern is with individuals or businesses that may help move digital assets, hide financial activity, or weaken proper oversight. According to the letter, investigators and prosecutors depend on existing tools to follow financial trails, identify bad actors, recover stolen funds, and protect victims. If oversight becomes weaker, those efforts could become harder.

Crypto Crime Remains a Serious Public Safety Issue

The letter said criminal organizations are increasingly using digital assets to support or hide unlawful activity. These crimes include drug trafficking, fraud, child exploitation, ransomware attacks, sanctions evasion, terrorism financing, organized retail crime, and other cross-border criminal activity.

For law enforcement, crypto crime is not only a market issue. It can affect real victims, businesses, and communities. Authorities often need financial records, identity checks, and suspicious activity reports to understand where stolen or illegal funds have moved.

The groups also warned that Section 604 is not the only concern in the CLARITY Act. They said other parts of the bill may reduce transparency and weaken the anti-money-laundering and counter-terrorist-financing framework.

AML requirements are meant to curb money laundering. KYC requirements demand that financial institutions confirm their clients’ identity. Bank Secrecy Act, also referred to as BSA, provides law enforcement with vital reporting and record-keeping capabilities. Enforcement organizations believe such requirements should be maintained within crypto regulations.

Law Enforcement Raises Concerns Over Mixers, Tumblers, and DeFi Exemptions

The letter also mentioned mixers, tumblers, and some decentralized finance businesses. Mixers and tumblers can make crypto transactions harder to trace by hiding the movement of funds. While crypto technology can have legal uses, these tools can also be used to conceal illegal money.

The groups said no class of crypto market participant should receive a blanket exemption from registration, KYC, BSA, or AML/CFT requirements. They argued that a lasting crypto framework should support innovation while maintaining accountability, transparency, and enforcement tools. The groups indicated that they are willing to cooperate with the Administration, Congress, and others going forward. They aim to ensure that the developed crypto regulations safeguard innovation while also enabling law enforcement to fight crime.

Advertisement