TLDR
- Bipartisan senators have raised concerns over a provision in the crypto bill that could weaken money laundering enforcement.
- Senators Chuck Grassley and Dick Durbin warned the bill could exempt too many blockchain developers from financial regulations.
- The provision could have prevented government action against the founder of the Tornado Cash crypto mixer.
- The National Association of Assistant United States Attorneys also expressed concerns about the bill limiting the prosecution of financial crimes.
- Senator Tim Scott’s office defended the provision, claiming it would protect software developers while allowing law enforcement tools.
A group of bipartisan senators has raised concerns about a provision in Senate Banking Chair Tim Scott’s crypto bill. The provision, which exempts certain blockchain software developers from financial licensing requirements, could hinder law enforcement’s ability to tackle money laundering and other illicit financial crimes. Senators Chuck Grassley and Dick Durbin, along with other Judiciary leaders, have warned that this provision needs further scrutiny.
Grassley and Durbin Raise Concerns Over Crypto Bill
Senators Chuck Grassley and Dick Durbin have voiced concerns about Section 604 of the crypto market structure legislation. In a private letter to Senate Banking Committee leaders Tim Scott and Elizabeth Warren, they argued that the provision could undermine efforts to combat financial crimes. They emphasized that their committee had not been consulted about the section, which mirrors a separate piece of bipartisan legislation called the Blockchain Regulatory Certainty Act.
Grassley and Durbin criticized the provision for exempting “a dangerously broad category of actors” from criminal law treatment. According to the senators, this exemption would have likely prevented the government from bringing charges against the founder of Tornado Cash, a crypto mixer platform used in money laundering operations. They warned that this gap could attract illicit actors to decentralized finance (DeFi) platforms, which operate without centralized oversight.
National Law Enforcement Voices Concerns
The National Association of Assistant United States Attorneys has echoed Grassley and Durbin’s concerns. The group expressed that the provision in the crypto bill could limit prosecutors’ ability to pursue financial crime cases involving decentralized platforms. They argued that by exempting software developers who do not control or touch user funds, the bill could make it harder for law enforcement to prosecute illicit financial activities effectively.
Despite these concerns, Senator Scott’s office defended the provision, emphasizing its intent to protect software developers while preserving law enforcement tools for prosecuting illegal money transmission. A spokesperson for Scott noted that the senator remains committed to balancing developer protections with law enforcement capabilities. The committee has yet to schedule a markup of the legislation after delays caused by ongoing debates over the provision’s implications.
The debate over the crypto bill has sparked mixed reactions within the industry. Supporters of the provision, including Senator Cynthia Lummis and crypto proponents, argue that it is essential for fostering innovation. They contend that blockchain developers should not be subjected to the same regulations as traditional financial institutions, particularly when they do not control user funds.
After months of hard work, we have bipartisan text ready for Thursday’s markup. I urge my Democrat colleagues: don’t retreat from our progress. The Digital Asset Market Clarity Act will provide the clarity needed to keep innovation in the U.S. & protect consumers. Let’s do this! pic.twitter.com/fuu5CIQa8X
— Senator Cynthia Lummis (@SenLummis) January 13, 2026
However, some crypto firms, including Coinbase, have voiced concerns over other aspects of the bill. Coinbase CEO Brian Armstrong described the draft legislation as “catastrophic” due to restrictions on decentralized finance and stablecoin yield limitations. Armstrong stressed that the company would prefer no bill at all if the current version remained unchanged.
