US law enforcement group drops opposition to CLARITY Act: Report

The Major County Sheriffs of America reportedly said it no longer opposes the CLARITY Act after initially raising concerns over how the bill would affect illicit finance investigations.

In a letter to US Senate Banking Committee chair Tim Scott and Senator Elizabeth Warren on Friday, the MCSA said it shifted its stance on the CLARITY Act to “neutral” after some of its concerns in a May 14 letter regarding Section 604 in the bill were addressed.

Section 604 relates to the Blockchain Regulatory Certainty Act, which seeks to protect developers from liability for illicit activity committed by users on their decentralized platforms.

The MCSA previously contended that Section 604 could create a loophole for criminals to exploit, making it tougher for law enforcement to investigate crypto-related crimes.

While the CLARITY Act has bipartisan support, its passage through the Senate has largely been stalled by banking groups seeking to restrict stablecoin yield, which they argue functions like an unregulated deposit product that could drive trillions of dollars in outflows from the traditional banking system. 

The bill has been awaiting a full Senate vote since May, when the Senate Banking Committee passed the bill mostly along party lines.

Senators in favor of the bill are pushing for a full Senate vote this month, in hopes that it can be passed and signed into law before the US midterm elections in November.

One of CLARITY Act’s “biggest roadblocks” removed

Crypto investor Mark Chadwick described MCSA’s initial opposition to the CLARITY Act as one of the “biggest roadblocks” in preventing the Senate from passing the bill.

“With that hurdle now out of the way, the path to passage just got a lot clearer,” Chadwick said. “One more major hurdle down.”

MCSA still wants improvements to CLARITY Act

The MCSA said it would like the CLARITY Act to be amended to include state law enforcement in Section 309, which requires the Treasury Department to study decentralized finance and illicit finance risks.

MCSA President Bob Gualtieri argued that Congress should provide the training, technology and resources needed to “investigate increasingly sophisticated digital asset-enabled activity” tied to fraud, narcotics trafficking, ransomware, child exploitation, terrorism financing and other crimes.

“State and local law enforcement agencies investigate these crimes every day and must have the tools, partnerships, and resources necessary to identify offenders, trace illicit proceeds, recover assets, and protect victims.”