The Blockchain Association on Aug 3 defended the CLARITY Act after the National Sheriffs’ Association warned on July 31 that the bill could create broad exemptions for DeFi, crypto mixers and cross‑chain bridges, saying the law requires platforms that control customer funds to comply with BSA, AML and sanctions rules and includes $3 billion in funding for state and local law enforcement. The main dispute centers on Section 10604 (the BRCA), which would shield non‑custodial developers from money‑transmitter treatment, and the bill’s passage is uncertain after the Senate delayed action ahead of the Aug 7 recess with Kalshi pricing the chance of it becoming law in 2026 at about 36%.

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The fight to make the CLARITY Act a law is heating up in Washington. Just days before Congress begins its summer recess, the Blockchain Association has sent a new letter to Senate leaders defending the crypto bill after a national law enforcement group warned it could weaken efforts to fight financial crime.

Why Is the Blockchain Association Defending the CLARITY Act?

The recent clash began after the National Sheriffs’ Association (NSA) sent a letter to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer on July 31.

The sheriffs’ group claimed the CLARITY Act creates broad exemptions for decentralized finance (DeFi), crypto mixers, and cross-chain bridges. According to the group, these exemptions could make it harder for law enforcement to stop money laundering and other illegal activities.

On Aug. 3, the Blockchain Association responded with its own letter, saying the sheriffs had misunderstood the bill.

The crypto industry group said that the legislation does not create a blanket exemption for DeFi. Instead, it requires any company or platform that controls customer funds to follow Bank Secrecy Act (BSA) rules, anti-money laundering laws, and sanctions requirements.

The association also pointed out that the bill includes $3 billion in funding to help state and local law enforcement investigate crypto-related crimes.

The Biggest Dispute Is Over Section 10604

One of the biggest disagreements centers on Section 10604, also known as the Blockchain Regulatory Certainty Act (BRCA).

The National Sheriffs’ Association wants lawmakers to remove or narrow this section because it protects non-custodial blockchain developers from being treated as money transmitters.

However, the Blockchain Association argues that software developers should not be regulated like financial institutions if they never take control of customer assets.

The group’s executive director, Summer Mersinger, said the bill keeps a clear line between financial services and software development, while still protecting consumers.

Make or Break Week For CLARITY Act

The timing of the Blockchain Association’s letter is important because Congress is set to begin its summer recess on Aug. 7. That gives lawmakers only a few days to act on the CLARITY Act.

However, the bill is currently stuck in the Senate. It was left off the Senate’s agenda for the final week before the recess.

Senate Majority Leader John Thune has already confirmed that the Senate will not vote on the bill before Aug. 7, as lawmakers are giving priority to judicial nominations and a Russia sanctions bill.

The delay has also hurt market confidence. According to Kalshi, the chances of the CLARITY Act becoming law in 2026 have dropped to around 36%, showing that traders expect the bill to face a longer wait.

Read the article at Coinpedia