TL;DR
- A crypto developer was convicted in 2025 of operating an illegal money transmission business, intensifying the political debate in the U.S.
- The CLARITY Act aims to provide DeFi developers with a legal «safe harbor» and prevent them from being classified as money transmission services.
- The bill passed the House of Representatives in July 2025 with 294 votes to 134, but has since been stalled in the Senate Banking Committee.
- Critics warn that certain provisions could still impose KYC requirements on non-custodial platforms.
Conviction Triggered Political Storm
When a crypto developer was found guilty last year of operating an unlicensed money transmission service, it sent shockwaves through the American DeFi community. The case — and similar lawsuits — have now become central arguments in one of Washington's most heated regulatory debates, according to Bitcoinist.
The question is simple in theory, but complicated in practice: When does a developer cease to be a neutral technology provider and begin to act as a financial service provider subject to money transmission legislation?
«If the CLARITY Act is not passed, the SEC could one day turn around and treat almost all crypto assets as securities» — Peter Van Valkenburgh, Executive Director of Coin Center
What is the CLARITY Act?
The Digital Asset Market Clarity Act of 2025 — popularly known as the CLARITY Act — is an attempt to clarify what has long been described as a legal patchwork of conflicting federal and state rules for digital assets in the U.S.
The bill divides digital assets into three categories: digital commodities (such as Bitcoin and Ethereum), investment contract assets, and payment stablecoins. The goal is to draw a clear line between what falls under the SEC and what is subject to the CFTC, which is currently the subject of continuous «jurisdictional tug-of-war» between the two regulatory bodies.
Senate Delay Raises Concerns
Despite broad bipartisan support in the House of Representatives, the bill has been on hold since January 2026. A planned review in the Senate Banking Committee was postponed on January 15 without a new date, which industry players describe as highly frustrating.
Ripple CEO Brad Garlinghouse reportedly described the negotiation process as far from painless, according to Bitcoinist. Disagreement remains, particularly on how non-custodial DeFi platforms should be handled under anti-money laundering regulations.
The Developers' Dilemma
At the heart of the dispute are the paragraphs concerning non-custodial developers — that is, those who write code and maintain protocol infrastructure without controlling users' funds. The CLARITY Act includes provisions from the so-called Blockchain Regulatory Certainty Act, which provides these actors with legal protection against being classified as money transmission services.
However, critics point out that the law in its current form could still open the door to KYC requirements for non-custodial platforms — which in practice could mean that open-source development becomes subject to financial regulation.
What Happens if the Law is Not Passed?
Veteran trader Peter Brandt considers the CLARITY Act a positive factor that will provide clarity in the regulatory structure for crypto assets if passed. John Glover, Chief Investment Officer at Ledn, believes that an eventual passage is already priced into the market but still expects an upward price trend for Bitcoin and Ethereum over time.
The biggest risk, however, is the downside: If the Senate continues to postpone consideration — or rejects the bill — the industry organization Coin Center fears that the SEC could change course and treat almost all crypto assets as securities. This would represent a dramatic tightening compared to the current situation.
For DeFi developers, who have already seen a colleague criminally convicted for code he published, the CLARITY Act is far more than a political symbol — it is a question of personal legal freedom.
Sources: Bitcoinist, research on the CLARITY Act and existing regulatory frameworks (2025–2026)
