CLARITY Act: Law Enforcement Concerns Surface as Crypto Bill Faces Another Hurdle

The CLARITY Act is facing another hurdle as Senator Thom Tillis, a member of the Senate Banking Committee, has said that they must address law-enforcement concerns about a key DeFi provision. This comes amid expectations that the crypto bill’s markup could take place in May, with the bill facing a narrow window to pass before the midterm elections.

CLARITY Act Facing New Hurdle With Law Enforcement Concerns

According to a Politico report, Senator Tillis said lawmakers must address concerns raised by law enforcement groups about the DeFi provision in the CLARITY Act. The senator suggested that they have to address this issue before they can mark up the crypto bill.

The provision in question mirrors the Blockchain Regulatory Certainty Act. It protects DeFi developers, ensuring they are not responsible for illicit activity users engage in on their platforms. These law enforcement groups, which represent the police and prosecutors, argue that such a provision makes it harder to crack down on illicit finance.

These law enforcement groups are set to clash with stakeholders in the crypto industry, with some already stating that the provision is a major priority and that its inclusion in the CLARITY Act is non-negotiable. The White House also reportedly considers this provision a major priority.

This presents the latest hurdle for the crypto bill. As CoinGape reported, Democrats are demanding an ethics provision in the bill, which is also creating another hurdle, even as the bill continues to stall at the committee stage.

Senator Tillis’ support in advancing the CLARITY Act is critical, especially given that the Senate Banking Committee may need to advance the bill along party lines. Tillis has also said the bill must include an ethics provision and will vote against it if it doesn’t. The senator is also at the heart of negotiations between the banking and crypto industries over the stablecoin yield text.

“Not A Big New Hurdle”

Senator Cynthia Lummis said in an X post that law enforcement concerns aren’t a major new hurdle and that she is working on them now. “I am committed to keeping protections for non-money transmitting developers safe without tying law enforcement’s hands to hold bad actors accountable,” the senator stated.

She had mentioned at the Bitcoin conference that the CLARITY Act markup will hold in May and that they will get the crypto bill to the finish line. She declared that the industry will get market-structure legislation that will enable America to lead in this “freedom asset,” referring to Bitcoin.

However, as CoinGape reported, the crypto bill now faces an August deadline, as the Senate heads into a five-week recess ahead of the midterm elections. Galaxy Digital, which sees a 50% chance of the crypto bill passing this year, warned that the odds are likely to slip further if the Senate Banking Committee fails to mark up the bill in May.

However, it remains unclear how soon the Senate could address these issues related to stablecoin yield, ethics, and the DeFi protections. It is worth noting that SEC-related concerns also loom as Democrats push for bipartisan representation on the SEC, with Republicans already occupying three of the five seats.