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A bipartisan group of U.S. senators, led by Senate Judiciary Committee Chair Chuck Grassley (R-IA) and Ranking Member Dick Durbin (D-IL), has warned that key provisions in the Senate Banking Committee’s proposed cryptocurrency market structure legislation—known as the Digital Asset Market Clarity Act (CLARITY Act)—could undermine anti-money laundering (AML) enforcement and hinder prosecutions of illicit finance.
In a letter dated January 16, 2026, Grassley and Durbin criticized a section mirroring the Blockchain Regulatory Certainty Act (introduced by Senators Cynthia Lummis (R-WY) and Ron Wyden (D-OR)), which exempts certain blockchain software developers from financial licensing requirements if they do not control customer funds. The senators argue this exemption could limit law enforcement’s ability to pursue money laundering cases, citing the Tornado Cash precedent where developers faced charges for enabling illicit transactions despite claims of non-custodial status.
The concerns emerged amid ongoing negotiations on the CLARITY Act, a bipartisan amendment released by Senate Banking Chair Tim Scott (R-SC) on January 12, 2026, building on the House-passed version from July 2025. While the bill aims to clarify jurisdiction between the SEC and CFTC, define digital assets as commodities or securities, and impose BSA/AML obligations on digital commodity brokers, dealers, and exchanges, critics fear developer protections create loopholes for bad actors.
Proponents, including industry voices, maintain the language protects innovation by distinguishing non-custodial software creators from intermediaries subject to full AML rules. However, the senators emphasized that any final legislation must preserve robust safeguards against money laundering, sanctions evasion, and other crimes, given crypto’s pseudonymous nature and history of misuse.
The markup, originally scheduled for mid-January, has been delayed amid broader debates—including Coinbase’s withdrawal of support over DeFi restrictions, stablecoin rewards, and tokenized equities—highlighting fragile consensus. Additional sticking points involve ethics provisions sought by Democrats and banking industry opposition to potential deposit flight risks.
As discussions continue across Senate Banking, Agriculture, and Judiciary committees, lawmakers signal intent to push amendments ensuring AML frameworks remain strong. The outcome could reshape U.S. digital asset regulation, balancing innovation with financial security and influencing global standards.
