Law Enforcement, Catholic Groups Raise New Concerns Over CLARITY Act Ahead of July Hearing
Share
Key Takeaways
Law enforcement and nearly 100 Catholic leaders oppose the CLARITY Act’s Section 604.
Critics warn the bill could weaken AML, KYC, and anti-trafficking enforcement.
Falling support leaves the CLARITY Act’s Senate path increasingly uncertain.
The Digital Asset Market Clarity Act is heading into a July 17 House hearing carrying opposition from two directions that its drafters did not anticipate when the bill cleared the Senate Banking Committee in May: a law enforcement coalition arguing the legislation creates dangerous oversight gaps, and nearly 100 Catholic leaders warning it could weaken protections against human trafficking and financial crime.
Both groups have focused their criticism on Section 604 of the bill, which would codify the Blockchain Regulatory Certainty Act and exempt software developers who build decentralized blockchain applications from money transmitter obligations and from liability for crimes committed by users of those platforms.
Four law enforcement organizations sent a formal letter to administration officials arguing that Section 604 could create gaps in oversight and accountability that make it harder for authorities to investigate and prosecute crypto-related crimes.
🚨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
The groups contend the bill does not go far enough in applying the Know Your Customer and Anti-Money Laundering safeguards that traditional financial institutions must follow, and that certain crypto participants could be exempted from reporting obligations that have been standard in regulated finance for decades.
Notably, the National Fraternal Order of Police and the National Association of Police Organizations did not sign the letter, meaning opposition within law enforcement is not uniform, a distinction that matters as Senate negotiators weigh how broadly the objections run.
Catholic Leaders Invoke Human Dignity
The Alliance to End Human Trafficking, a Catholic-backed organization, separately warned Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer that Section 604 could weaken safeguards against illicit finance and create vulnerabilities that bad actors exploit for trafficking and exploitation networks.
LATEST: 🇺🇸 Nearly 100 Catholic leaders wrote to Senate leaders opposing the CLARITY Act, warning its Section 604 safe harbor for non-custodial developers could hinder law enforcement efforts against trafficking. https://t.co/2IMOIBaHtDpic.twitter.com/PtSbEGAU4S
Nearly 100 Catholic leaders signed the letter, framing their opposition in the language of Catholic social teaching: that the test of any financial system is not whether it generates wealth or innovation, but whether it safeguards human life and dignity.
The Bank Policy Institute added institutional weight to the criticism, issuing a brief on June 17 describing the Senate CLARITY bill as illicit finance-friendly rather than innovation-friendly and warning that DeFi platforms and unhosted wallets would fall outside standard AML and sanctions rules entirely under the current draft.
Senate Floor Vote Remains Elusive
The new opposition letters arrive as Senate negotiations have already broken down on two fronts. An ethics provision collapsed after Republicans and the White House withdrew support for language that would have allowed state attorneys general to enforce conflict-of-interest rules tied to officials with crypto holdings.
A separate agreement on Section 604 itself fell apart when Senators Mark Warner and Catherine Cortez Masto made their floor votes conditional on law enforcement signing off on the DeFi language, a condition that has not been met.
Speaking on Mornings with Maria, Senator Cynthia Lummis said lawmakers are preparing to release the latest text of the CLARITY Act over the July 4 holiday to give members “one last really thorough look” before moving ahead.
"We are finally to the point where we are going to put out the text over the July 4th and give people one last really thorough look at the bill. And then, we are moving in July." pic.twitter.com/yvnwcfXXKn
She indicated that Congress intends to advance the legislation in July, signaling that negotiations have reached a stage where leadership is ready to push the bill toward a floor vote.
However, Polymarket odds of the bill passing in 2026 have fallen to 42%, down from 74% a month ago. The July 17 House hearing is now the next concrete milestone, though it does not resolve the Senate vote count problem that has stalled the bill since May.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
Dr. Guneet Kaur is a senior editor at CCN.com and a Science Fellow at Exponential Science. She is a fintech and blockchain expert with extensive experience in digital finance education, blockchain ecosystems, and cryptocurrency markets. She has worked with global media such as Cointelegraph, as well as education and blockchain platforms, to design and lead strategic content and learning initiatives. As an educator and assessor for top-tier executive programs, she bridges real-world fintech trends with academic insight.
Dr. Kaur is also a published researcher and peer reviewer across fintech and data science journals, including Financial Innovation Journal and International Journal of Big Data Intelligence and Applications. Her work spans data-driven analysis, Web3 innovation, and technical content development. With a strong foundation in both industry and academia, she translates complex financial technologies into practical applications, empowering learners, professionals, and institutions across the rapidly evolving digital finance landscape.
