US Senate Judiciary Committee Pushes To Strip Developer Safeguards From Crypto Bill

• The leadership of the Senate Judiciary Committee has called on the Senate Banking Committee to strip provisions that deal with protecting developers.
• This assertion is set against the backdrop of congressional disagreements regarding the regulation of electronic assets.

Senior members of the US Senate Judiciary Committee have called upon the Senate Banking Committee to exploit the so-called developer protections proposed in the current version of the cryptocurrency market structure bill, citing that the bill may obstruct the enforcement of federal law relating to money transmission.

The letter was written to members of the Senate Banking Committee and was signed by GOP Chairman Chuck Grassley, R-Iowa, and ranking member Dick Durbin, D-Illinois, where the two explain that some parts of the bill, in particular, the Blockchain Regulatory Certainty Act, or BRCA, would create “significant gaps in enforcement for decentralized platforms if not fixed.”

So, under this rule, software developers and providers who fail to exercise power over users’ funds will not be covered by national or state money transmission laws. Advocates of this rule believe that this rule protects software developers of non-custodial software from being held responsible for how their software is used by its users.

Senate Judiciary Committee leaders Chuck Grassley and Dick Durbin said the provisions on developer safeguards were left out of the larger crypto market structure bill because issues such as criminal law, unlicensed money transmission, and anti-money laundering enforcement are within the purview of the Judiciary Committee. The senators said that the committee was never consulted in advance about the inclusion of those provisions and underscored that any changes that impact federal criminal statutes have to go through the Judiciary Committee process.

Legislative Processes and Larger Context

Pro-developer protection lawmakers have argued that software developers who do not custody or control users’ funds should not be considered money transmitters, as is reflected in the BRCA introduced by Senators like Cynthia Lummis and Ron Wyden, which seeks to clarify that non-custodial developers are not subject to money transmission laws.

But the Senate Judiciary Committee’s leadership had concerns that including similar protections within the crypto market structure bill would muddle how the concept would be enforced and confuse how current criminal statutes—such as those dealing with money laundering and unlawful financial activity—are applied. They said it’s in their committee’s jurisdiction and should be pursued through separate legislation.

The market structure bill has also encountered some procedural issues and legislative challenges as various parties have expressed their disquiet regarding its breadth and structure. The current negotiations also encompass some outstanding issues regarding stablecoin regulation and sharing regulatory control between federal regulatory bodies such as the SEC and CFTC.

Such tendencies are part of larger Congress debates in forming digital asset legislation structure in matters such as the responsibility of developers, enforcement powers, and coordination in regulations, still under consideration by lawmakers as they continue to shape the framework of oversight of the US crypto industry.

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