The Blockchain Association has issued a forceful rebuttal against the National Sheriffs’ Association, asserting that the CLARITY Act would not offer a “blanket exemption” from anti-money laundering rules for decentralized finance platforms or their developers. In an eight-page letter sent on August 3 to Senate Majority Leader John Thune and Minority Leader Chuck Schumer, the industry group argued that the sheriffs’ organization misconstrued key provisions of the bill, particularly Section 10604, which ensures that non-custodial developers are not automatically classified as money transmitters.
The exchange comes during a critical stretch for the legislation, as the Senate is set to begin its August recess on Friday, leaving only a few working days for any procedural motion. “Because a vote on the Senate floor is in the near future, it’s really important to correct the record on any kind of existing misconceptions about the bill,” Lindsay Fraser, the Blockchain Association’s chief policy officer, told The Block.
The dispute centers on whether the latest draft of the CLARITY Act—the most comprehensive federal crypto regulatory framework yet proposed—would inadvertently shield illicit actors. The National Sheriffs’ Association, representing over 3,000 sheriffs, wrote to Senate leaders on July 31 urging either the deletion or significant narrowing of Section 10604, warning that it could make financial crime investigations more difficult. The Blockchain Association countered that the legislation in fact draws a clear line between financial intermediaries and neutral software developers, while preserving criminal laws against money laundering, sanctions violations, fraud, and terrorism financing.
The industry group stressed that registered brokers, dealers, and exchanges would still be subject to Bank Secrecy Act duties, including anti-money laundering programs, customer identification, and suspicious activity reporting. Additionally, the bill authorizes $600 million per year from fiscal 2027 through 2031 for state and local digital asset investigations, and provides $30 million annually for FinCEN. The letter also pointed to a directive for the SEC and Treasury to craft rules for protocols that claim decentralization but still exercise control over user assets.
The law enforcement community itself remains divided. The Blockchain Association highlighted support from the Fraternal Order of Police, the Federal Law Enforcement Officers Association, and 160 former law enforcement and national security officials who had urged Senate action. The Major County Sheriffs of America has taken a neutral stance.
On Capitol Hill, the legislative calendar is tight. Senators adjourned Monday after invoking cloture on a continuing resolution vehicle, and no procedural vote on H.R. 3633 (the CLARITY Act) had been scheduled. According to Senate rules, a cloture filing by August 5 could still enable a Friday procedural vote, but even then the bill would require further debate, amendments, and House concurrence. An additional complication is lingering ethical concerns tied to former President Trump’s crypto interests, including a memecoin he launched and his family’s involvement in World Liberty Financial, which have delayed a bipartisan deal.
