The Judicial Committee's letter triggers a legislative storm: Section 604 of the CLARITY Act is hanging by a thread

The progress of cryptocurrency regulation in the US Congress has once again fallen into deadlock. On January 17, the Senate Judiciary Committee sent a strongly worded letter to the Banking Committee, directly pointing out that Section 604 of the Blockchain Regulatory Certainty Act poses significant legal risks and demanding its removal.

This clause, which developers see as a safeguard, was originally intended to prevent software developers from being held criminally responsible due to misuse of their tools by others. However, in the letter, Senate Judiciary Committee Republican Chairman Chuck Grassley and lead Democratic Senator Dick Durbin stated that this clause would actually weaken federal oversight of unlicensed fund transfer activities, crossing a bottom line for the Justice Department.

Real Cases Become the Focus of Debate

The Judiciary Committee specifically cited the prosecution of Tornado Cash developer Roman Storm. In their view, this case fully demonstrates that the existing legal framework is necessary and effective in combating illegal fund transfer activities. Removing or amending the relevant provisions would create obstacles for law enforcement and give those involved in fund transfers under the guise of “developers” legal loopholes.

This targeted letter directly hits the core contradiction between DeFi advocates and regulators: how to balance protecting innovation with preventing abuse.

Legislative Process on a Tightrope

The Banking Committee originally planned to vote on the bill on January 18, but due to a sharp increase in opposition on Wednesday evening, the vote was postponed. Now, if Section 604 remains in the bill, the Judiciary Committee—being the third key committee with significant influence—will inevitably participate in the final coordination and signing process, further complicating the entire legislative procedure.

The DeFi community has already sent a clear signal: if these developer protection clauses are entirely removed, they will consider withdrawing support for the entire bill. This means that the already sluggish crypto regulation legislation now faces the risk of being completely shelved. The final statement in the letter from the Judiciary Committee also reflects the seriousness of this standoff: “We urge the Committee to reject any proposed provisions that could weaken the government’s ability to hold accountable those involved in unlicensed fund transfer activities, including Section 604.”

The complexity of policy negotiations once again reminds us that crypto regulation is not a simple political choice but a systemic challenge involving judicial, commercial, and innovative interests.