To Maintain Crypto Leadership, America Must Safeguard Its Innovators

As the Clarity Act nears completion, there remains a crucial provision at risk for builders, warns Smith. Recently, prominent founders, CEOs, and investors in the crypto sector collectively urged Senate leaders to ensure the Clarity Act’s protections for software developers remain intact. Despite being competitors in terms of talent, capital, and market share, they unite in this request because they recognize the stakes involved. Removing developer protections from the legislation could drive the individuals responsible for creating this technology abroad, jeopardizing the United States’ position in the forthcoming financial landscape.

Congress is closer than ever to establishing a solid regulatory framework for digital assets. The Senate Banking Committee has moved the Clarity Act forward with bipartisan backing, and the bill is set to go for a full vote on the Senate floor.

However, one key provision is under threat. The Blockchain Regulatory Certainty Act (BRCA) serves as the cornerstone for everything else. It clearly states that if you develop open-source software, operate a node, or assist in validating transactions without ever controlling anyone’s funds, you are not classified as a money transmitter under federal law.

The entire Clarity Act hinges on this assurance, as there would be no digital asset market to regulate if developers cannot afford to operate in the U.S. This provision successfully passed through the committee markup without alterations, despite an amendment attempt that would have weakened it, and it must remain intact for the final vote.

This is significant for individuals who may never read the law. Engineers creating this software, from core Solana contributors to those designing new DeFi protocols, produce code that anyone can access and utilize. They do not handle any money, cannot freeze accounts, or transfer funds because they do not interact with them. Equating a software developer to a bank teller is as nonsensical as labeling an email app engineer a postal worker. The Treasury’s 2019 FinCEN guidance already acknowledged that simply providing software or network tools used by money transmitters does not automatically qualify someone as a money transmitter. The BRCA aligns the criminal code with this understanding.

When laws lack clarity, regulators and prosecutors tend to fill the void. The Treasury has targeted developers who created and released software without ever possessing customer assets. The prosecution of Tornado Cash developer Roman Storm for allegedly running an unlicensed money transmitting operation is a known case and exemplifies a troubling trend for those invested in American innovation. Incidents like this are driving developers to relocate overseas.

The statistics reveal a concerning trend. The U.S. share of global open-source crypto developers has plummeted from 38% in 2015 to around 19% according to the latest annual survey. Each of these engineers represents jobs, tax income, and technology that serves the greater good. America cannot lead in industries it forces to relocate. We have the option to retain this work domestically, governed by American regulations, or watch it migrate to locations like Singapore and Abu Dhabi, only to later question why we allowed this to happen.

Some express concern that shielding developers equates to leniency toward criminal activities. This is not the case. The BRCA does not legalize money laundering, sanctions evasion, fraud, trafficking, or terrorist financing, and anyone who holds customer funds continues to be bound by the same anti-money-laundering regulations as before. Defining clear boundaries does not weaken enforcement; rather, it enhances it by distinguishing lawful builders from the criminals prosecutors ought to pursue.

The BRCA has consistently been a non-partisan topic. In the Senate, it is championed by Sens. Cynthia Lummis (R-WY) and Ron Wyden (D-OR). In the House, Majority Whip Tom Emmer (R-MN) and Rep. Ritchie Torres (D-NY) are collaborating on it. Such consensus is rare in Washington and reflects a principle that predates crypto: a nation that protects its builders is one that those builders will choose to remain in.

The Clarity Act represents a once-in-a-generation opportunity to replace surprise enforcement with stable, predictable regulations. That is precisely why the developer protections must not be compromised as we approach the finish line. A bill that regulates exchanges and token issuers while leaving the architects of the foundational technology vulnerable would defeat its own objectives and cede the industry’s future to other nations.

Years ago, I informed a doubtful Senate that crypto was here to stay. The Clarity Act is the time to validate that assertion. Maintain the integrity of the BRCA, safeguard the builders, and allow America to remain the epicenter of innovation for the decades ahead.