Key clause in US Clarity Act draws sharp criticism! What is dividing anti human trafficking and crypto experts?

Civil society representatives working in the field of combating human trafficking are voicing strong objections to Section 604 of the Clarity Act, currently under discussion in the United States. The focal point of their concerns is the provision stating that software developers who do not control user assets should not be considered money transmitters. They argue this regulation could allow certain crypto platform developers to evade responsibility when their technologies are used illicitly.

Section 604 at the center of the backlash

Katie Boller Gosewisch, Executive Director of the Alliance to End Human Trafficking, emphasized that this very definition is at the root of their apprehensions. According to Gosewisch, the clause could open the door for third-party platform developers to sidestep legal liabilities, even if their software is used in transactions linked to human trafficking.

The Alliance to End Human Trafficking, together with Catholic Charities, expressed these concerns in a letter sent to Senate Majority Leader John Thune and Minority Leader Chuck Schumer. The organizations are calling for a renewed review of the bill’s language and a closing of potential loopholes.

The crypto legal community sees it differently

In an interview with CoinDesk, Rebecca Rettig argued that Section 604 does not create a new shield, but instead clarifies the long-standing US anti-money laundering framework. Rettig insists that not classifying developers without custody over client funds as money transmitters aligns with existing Bank Secrecy Act regulations and FinCEN guidance.

FinCEN, known officially as the Financial Crimes Enforcement Network under the US Treasury Department, provides guidelines on issues such as money laundering and sanctions violations.

Mini glossary: FinCEN is the US Financial Crimes Enforcement Network. The Bank Secrecy Act forms the foundational federal framework for monitoring financial transactions and reporting suspicious activity.

Rettig also noted that prosecutors can still rely on existing anti-money laundering laws when going after developers who knowingly facilitate illegal activity. She pointed out that federal regulations such as 18 U.S.C. § 1956 continue to be enforceable in these contexts.

Debate centers on future risks and regulatory approaches

The key divide among stakeholders is whether the law should be defined based on today’s technological realities or potential future abuse scenarios. Gosewisch warned that, regardless of current intentions, sophisticated criminal networks might exploit this section in the future to generate reasonable doubt in court cases.

Openly stating she is not a lawyer, Gosewisch nonetheless urged Congress to consider how malicious actors could leverage legislative wording over time. She drew parallels with legal debates about duty of care, referencing lawsuits previously brought against hotels in similar contexts.

Both sides call for stronger anti human trafficking efforts

Despite their disagreements, both camps agree on the importance of more effective enforcement and investigative mechanisms to fight human trafficking. Gosewisch listed strengthened federal coordination and focused financial crime investigations as positive steps forward in this struggle.

Rettig, on the other hand, pointed to the open ledger nature of blockchain transactions as giving law enforcement valuable investigative tools. As debates over the Clarity Act continue, legal assessments regarding the responsibility of decentralized crypto protocol developers are also playing out in US courts.

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