The CLARITY Act has emerged as the focal point of a growing debate over DeFi developer protections, with proponents arguing it would provide clear safeguards against liability and mischaracterization. U.S. Senator Cynthia Lummis said the legislation would deliver the strongest protections yet for DeFi developers, pushing back against concerns that the bill could expose them to legal risk. She also noted bipartisan updates to Title 3 aimed at addressing those concerns, though the latest draft has not yet been released publicly. Analyst Jake Chervinsky expressed support for Lummis’ stance in spirit but warned that provisions within Title 3—designed to tackle illicit finance—could still treat non-custodial developers as money transmitters if they do not handle user funds.
Such a classification could impose compliance requirements like KYC on DeFi builders who do not custody assets. These concerns underscore the broader issue of ensuring developers are not mischaracterized under existing financial rules. Mostly, the discussions are around how these provisions align with the Blockchain Regulatory Certainty Act (BRCA), introduced by Lummis and Senator Ron Wyden. The BRCA is designed to clarify that developers and infrastructure providers should not fall under financial institution rules if they lack control over assets.
“The biggest challenge is ensuring non-custodial software developers aren’t misclassified as money transmitters,” Chervinsky said. Earlier drafts included these protections alongside self-custody provisions. However, the addition of new language has raised concerns that these safeguards may not hold up in practice, creating uncertainty for developers. The issue has gained urgency following recent legal actions in the U.S., including the 2025 conviction of Roman Storm.
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