Seventy thousand US law enforcement officers and a powerful Wall Street lobbying group have warned that President Donald Trump’s flagship Clarity Act crypto bill could open fresh money laundering loopholes in the United States, transforming what is billed as a clean-up into what some critics bluntly call an ‘illicit finance-friendly’ crypto bill.
For context, the Clarity Act is pitched as the long‑promised answer to the chaotic patchwork of US cryptocurrency rules. It would place much of the industry under a single national framework for the first time, something crypto giants and the White House have demanded for years. The bill passed the House of Representatives last summer with bipartisan support and has since become a lobbying magnet in Washington, with exchanges, banks, police groups and anti-corruption campaigners all scrambling to shape the final text.
Law Enforcement Warns Trump’s Crypto Bill Leaves Criminal ‘Gaps’
The sharpest criticism of the crypto bill comes from front‑line law enforcement. In recent months, groups including the National Sheriffs’ Association and the National Association of Assistant U.S. Attorneys have sent formal letters to lawmakers warning that the legislation could provide regulatory safe havens for the very tools organised crime already prefers.
Their latest salvo landed yesterday, when four national police and prosecutors’ associations wrote to the acting US Attorney General to say they remain unconvinced by reassurances from senior Trump administration officials. The groups, which say they represent more than 70,000 law enforcement professionals, argue that the bill’s ‘broad exemptions could create gaps in oversight and accountability that sophisticated criminal actors may exploit’.
The letter, attributed to the four associations, sets out what keeps them up at night. ‘Criminal organisations increasingly utilise digital assets to facilitate and conceal unlawful activity, including narcotics trafficking, fraud, child exploitation, ransomware attacks, sanctions evasion, terrorism financing, organised retail crime, and other forms of transnational criminal activity,’ it states, pointing in particular to carve‑outs for some decentralised services. Regulatory certainty, they argue, should not come at the cost of ‘accountability, transparency, victim protection, or public safety’.
Anti-corruption advocates are no less scathing. Gary Kalman, executive director of Transparency International U.S., which has lobbied Congress on the bill, told the International Consortium of Investigative Journalists that the package risks creating the illusion of robust oversight without delivering it. ‘By doing this light-touch regulation, people are going to say “this is regulated so it’s safer now”,’ he said. ‘But this is largely window-dressing type regulation.’
Their concerns are grounded in how crypto crime actually works. An ICIJ investigation, The Coin Laundry, found that scammers and North Korean hackers have funnelled hundreds of millions of dollars’ worth of cryptocurrency through decentralised trading protocols, where suspect flows can mix with legitimate funds at scale. Many of these automated ‘swapping’ services carry out minimal identity checks and, according to academic research cited by ICIJ, often leave compliance teams at mainstream exchanges blind to where the money truly came from.
‘After the money comes out of the swaps, most exchanges treat it as clean money,’ John Griffin, a University of Texas professor who studies illicit finance in crypto, told ICIJ last year. ‘[This] gives them plausible deniability.’
Crypto Bill Backers Push Back, With Industry Voices In Uniform
The industry’s response has been emphatic, and unusually personal. Coinbase, one of the world’s largest crypto exchanges and a major lobbying presence on the Clarity Act, insists that critics are getting the text wrong.
The bill’s supposed loophole for decentralised services ‘does not exist’, Robin Cook, Coinbase’s director of US policy, told ICIJ. He pointed to Section 301, which he said would in fact pull most automated trading protocols into the orbit of traditional anti‑money laundering rules. ‘It is bringing new regulation at the federal level where there isn’t any today,’ Cook argued. ‘That is not a deregulatory bill. The idea that somehow this is deregulatory is demonstrably false.’
Lobbying disclosures collated by watchdog Open Secrets show just how much is riding on that interpretation. Coinbase is among the top filers of lobbying reports relating to the bill. Several firms tied to decentralised finance projects have also hired Washington operators this year specifically on the Clarity Act.
In what looked very much like a counter‑attack on the police unions’ narrative, the Blockchain Association, an industry group, recently sent senators what it advertised online as a ‘Blockchain Association Letter From Law Enforcement’. The document backs the bill as written and is endorsed by former FBI agents, ex federal prosecutors and a former chief of the US Justice Department’s money‑laundering section.
Scratch the surface though, and the picture is complicated. An analysis of public profiles by ICIJ found that most of the marquee signatories now work inside crypto companies. Eleven of them are currently employed by Coinbase, with two more at exchange OKX. The letter lists them as members of the Blockchain Association but does not spell out their present corporate affiliations next to their names.
A spokesperson for the association told ICIJ that the letter ‘clearly identified the signatories who work at Blockchain Association member companies’, and argued that their previous careers make them well placed to judge the bill. ‘Years of public service and frontline experience investigating crime, prosecuting bad actors, and protecting national security are exactly what make these signatories relevant voices on this issue,’ the spokesperson said in an email. ‘Providing clear, workable rules can only strengthen compliance and accountability.’
Supporters also stress that the crypto bill would, for the first time, explicitly subject exchanges and brokers to mainstream anti‑money laundering obligations, bring crypto ATMs under transaction monitoring and reporting rules, and make it easier for firms to freeze dubious transfers before victims lose everything. None of that is trivial.
Banks Warn Of ‘Illicit Finance-Friendly’ Gaps In The Crypto Bill
Yet unease over the Clarity Act is not limited to cops and campaigners. The Bank Policy Institute, which represents major US banks, has publicly aligned itself with law enforcement concerns, arguing that the bill risks building a two‑tier system of scrutiny.
In a note on its website last week, the institute said Congress should ensure that all crypto businesses performing similar functions face the same anti‑money laundering standards. Anything less, it warned, would leave mixers, tumblers and other blockchain tools that facilitate money laundering, terrorist financing and sanctions evasion sitting in a regulatory grey zone.
‘These gaps are not innovation-friendly; they are illicit finance-friendly,’ the group said. ‘If Congress wants an effective market structure framework, it must close these gaps.’
Trump, never one to leave a fight with ‘the Banks’ on the table, has accused the financial sector of trying to sabotage his crypto agenda. In a March post on Truth Social, the president complained that lenders should not ‘hold the Clarity Act hostage’, claiming they were already enjoying record profits while seeking to derail legislation that, in his telling, would ensure the industry does not drift to China and other countries.
Caught between a White House that sees strategic value in crypto and institutions that see a sprawling new money laundering risk, senators now face a familiar Washington dilemma. Do they bank the political win and pass a bill that pleases a fast‑growing industry, or slow things down to close the holes that detectives, banks and watchdogs say are still wide open?
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