A Senator’s fight to rescue crypto law’s most controversial line

Ron Wyden made a pick that most of the Democrats in Congress haven't, and it's for the crypto industry.

This week, he sent a letter to Senate Majority Leader John Thune and Democratic Leader Chuck Schumer urging them to retain Section 604 in the Clarity Act. No one apart from crypto policy cares what number that section is and how to find it, unless they come over the bridge. It's widely referred to as BRCA, the Blockchain Regulatory Certainty Act, and it is currently the entire bill's hostage.

The concept itself is quite simple. If you are only writing code and never touching any tokens of your own or anyone else's money, you shouldn't be a bank. That's it. The BRCA provides a safe harbor for developers who do not hold or control customer funds from being considered money transmitters. Cynthia Lummis later presented it as its own bill this spring. The only other senator to sign on is Wyden.

This isn't some abstract legal division and debate. A jury found Tornado Cash developer Roman Storm guilty of a money transmission crime in August after he just wrote software, not stole anything. This is exactly the kind of thing that happened that BRCA aims to prevent from happening again, and why this provision is viewed as make or break for the industry.

But law enforcement does not see it that way.

Two groups stood up in the month of June and pushed back hard. One included the National District Attorneys Association and the International Association of Chiefs of Police, representing more than 70,000 prosecutors, sheriffs and police. What they argue: The exemption might grant shelter to individuals who shuffle dirty cash behind the “I just wrote the code” defense.

The second letter is from the Alliance to End Human Trafficking, a network of Catholic Sisters (and advocates too). They even went so far as to link Section 604 specifically with trafficking: money laundering risks associated with both trafficking and money laundering could make it more difficult to trace funds linked to organized crime and the sexual exploitation of children.

The way Wyden answered is that the bill does this already.

He cites a provision in the letter which states that any developer who knowingly facilitated the movement of illicit funds loses complete immunity. The safe harbor is for those that really never take the funds, not a shield at all for anyone who participates in the crime. He also contends that it merely aligns FinCEN and DOJ policy, meaning law enforcement will stop pursuing coders and start going after those who actually controlled the funds.

What is on the side no longer even a side argument. The Clarity Act has already passed the Senate Banking Committee in May on a 15-9 vote, but Section 604 is one of two things still mired in Congress, with the other being unanswered ethics queries about officials with crypto connections, including Trump. Senate Judiciary Committee Chair Chuck Grassley also has his own objections, not specifically tied to the law enforcement letters, regarding BRCA involving federal criminal code at all.

Congress is headed for August recess soon. From that point, the midterms consume what remains of the schedule. And whatever Section 604 ends up looking like, it is sorting something real: legal protection for writing decentralized software in this country, or one prosecution away from every developer becoming the next Roman Storm.

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