Anti-Trafficking Group Warns CLARITY Act Section 604 Could Weaken Accountability

What to Know

• The Alliance to End Human Trafficking says Section 604 of the CLARITY Act could weaken accountability for some crypto platform developers.
• Advocates argue the language may let developers avoid liability if they do not directly control user funds.
• The organization, alongside Catholic Charities, has sent a letter to Senate leaders raising concerns about the bill.
• Supporters of the provision say it only clarifies existing money transmission rules under Bank Secrecy Act and FinCEN guidance.
• Proponents also say criminal liability remains available under other statutes when someone knowingly facilitates illegal activity.

Advocates press lawmakers to revisit Section 604

The Alliance to End Human Trafficking is asking lawmakers to take another look at Section 604 of the CLARITY Act, a provision that has become a flashpoint in the broader debate over how U.S. crypto rules should treat software developers and platform operators. The group says the bill, as written, could make it more difficult to hold certain developers accountable when their technology is used to facilitate human trafficking payments.

Katie Boller Gosewisch, executive director of the Alliance to End Human Trafficking, said the organization’s main concern is language that says developers who do not control user funds are not money transmitters. In the group’s view, that distinction could allow some third-party developers to sidestep responsibility by pointing to the structure of their software rather than the real-world use of their tools.

The accountability debate centers on control of user funds

At the heart of the dispute is whether a developer or platform should face money transmitter obligations if it does not hold or control customer assets. Critics of Section 604 say the provision could create a legal gap for actors building tools that may be used to move illicit funds, including payments linked to trafficking networks. They argue that bad actors can exploit technical distinctions to obscure responsibility.

Boller Gosewisch said the concern is not only theoretical. In her view, a legal framework that places too much weight on whether a developer directly controls funds could allow some entities to “hide behind” a lack of liability, even when their products are used in harmful criminal conduct. The Alliance says Congress should ensure the legislation does not unintentionally narrow accountability in cases involving exploitation and trafficking.

Alliance and Catholic Charities raise the issue with Senate leaders

The Alliance to End Human Trafficking and Catholic Charities recently sent a letter to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer outlining their objections. The letter urges lawmakers to revisit the language in Section 604 before advancing the legislation further.

That intervention reflects a broader concern among advocacy organizations that crypto policy should not be drafted so narrowly that it complicates enforcement in serious criminal cases. For anti-trafficking groups, the central issue is ensuring that legal definitions do not undermine prosecutors, investigators, or victims seeking accountability when digital tools are used to move illicit payments.

Supporters say the provision mirrors existing policy

Defenders of Section 604 say the criticism misreads the bill’s intent. Rebecca Rettig, speaking on CoinDesk’s The Policy Protocol alongside Boller Gosewisch and Renato Mariotti, argued that the provision does not invent a new shield for developers. Instead, she said, it reflects long-standing U.S. anti-money laundering policy by clarifying that developers who do not control customer assets are not money transmitters.

According to Rettig, that position is consistent with existing Bank Secrecy Act expectations and FinCEN guidance. In her view, the bill preserves liability for parties that actually control user funds while avoiding an overly expansive reading of money transmission rules that could sweep in software developers who are not acting as financial intermediaries.

Criminal exposure still exists, supporters argue

Supporters of the CLARITY Act provision also contend that the language would not eliminate exposure under other criminal statutes. Rettig pointed to federal money laundering laws, including 18 U.S.C. § 1956, as examples of the tools prosecutors already have available when someone knowingly facilitates criminal activity. From that perspective, Section 604 is not a get-out-of-jail-free card; it is a definitional clarification about when a developer is or is not a money transmitter.

That distinction matters because crypto policy often turns on where to draw the line between neutral infrastructure and regulated financial activity. If lawmakers define those boundaries too broadly, supporters say, innovation may be chilled. If they define them too narrowly, critics warn, enforcement gaps could emerge in cases involving fraud, laundering, or trafficking-related payments.

Why the issue matters for crypto compliance

The Section 604 debate highlights a recurring challenge in digital asset regulation: matching traditional financial rules to software-based systems that may not operate through a single custodian or intermediary. Crypto platforms, wallets, and developer tools can have very different degrees of control over user assets, and that complexity often drives disagreement about who should be treated as a regulated money transmitter.

For compliance teams, the outcome could influence how protocols are designed, how developers document control over funds, and how legal risk is assessed when products are built for decentralized or non-custodial use. For lawmakers, the question is whether the bill should more clearly distinguish between code authors, platform operators, and entities that actually move customer money.

The current dispute shows that the CLARITY Act is being watched not only as a market structure bill but also as a test of how Congress balances innovation with public safety. Anti-trafficking advocates are urging caution, while defenders argue the legislation merely codifies existing law. The final shape of Section 604 could determine whether the bill is seen as a clarification of crypto regulation or a step too far in narrowing accountability.

Frequently Asked Questions (FAQs)

What is Section 604 of the CLARITY Act?

Section 604 is a provision that addresses when a crypto developer or platform should be considered a money transmitter, especially in cases where the developer does not control user funds.

Why are anti-trafficking advocates concerned?

They worry the language could make it harder to hold some developers accountable if their technology is used to facilitate trafficking-related payments.

Does the provision create immunity from prosecution?

Supporters say no. They argue it only clarifies money transmission status and does not remove liability under other criminal laws.

What did the Alliance to End Human Trafficking do?

The organization, together with Catholic Charities, sent a letter to Senate leaders urging them to revisit the provision.

How do supporters of Section 604 interpret the language?

Supporters say it aligns with existing Bank Secrecy Act and FinCEN guidance by distinguishing developers who do not control customer assets from money transmitters.

Can prosecutors still use other laws?

Yes. Supporters point to federal money laundering statutes, including 18 U.S.C. § 1956, as tools prosecutors can use in appropriate cases.

Why is control of user funds so important?

Control of user funds often determines whether a party is acting as a financial intermediary or simply building software that others use.

What does this mean for crypto regulation more broadly?

It shows how lawmakers are trying to balance innovation, compliance, and criminal enforcement in a sector where software and financial activity often overlap.

Photo by beyzahzah on Pexels