House Approves Section Protecting Blockchain Developers

The House of Representatives approved the Digital Asset Market Clarity Act of 2025 (H.R. 3633), known as the CLARITY Act, on July 17, 2025 by a 294–134 vote. The legislation added Section 604, which states that certain non‑custodial blockchain activities are not federal money transmission.

Section 604 specifies that writing open‑source blockchain software, operating a node, validating transactions or otherwise participating in decentralized protocol operations does not count as money transmission under federal law when the actor does not hold or control user funds. The provision removes those non‑custodial activities from the bill’s compliance obligations and places the exclusion in statute rather than leaving it to agency guidance or court decisions.

The language in Section 604 draws from Rep. Tom Emmer’s Blockchain Regulatory Certainty Act, a standalone bill that had not passed on its own. Lawmakers inserted Emmer’s provisions into the broader CLARITY Act, a market structure package that addresses SEC and CFTC jurisdictional questions, token classification and related crypto policy matters.

Industry groups including Coin Center and the Blockchain Association publicly supported the developer exemption. They argued the provision would allow protocol engineering and node operation to continue without subjecting non‑custodial activity to money‑transmitter licensing requirements.

Federal prosecutors and regulators have in some cases pursued enforcement actions against service providers and intermediaries whose work involved software updates, node operation or protocol maintenance even where those parties did not hold user assets. Section 604 aims to draw a statutory line between custodial services and non‑custodial protocol activity.

The provision explicitly covers decentralized finance protocols that operate without custodial intermediaries, including automated market makers, lending protocols and other smart‑contract systems. Entities that hold or control customer funds, such as custodians and centralized exchanges, would remain subject to existing money‑transmitter and custody rules.

The CLARITY Act has not passed the Senate. As of December 19, 2025, the bill failed to advance in the upper chamber on two occasions, leaving Section 604 unenacted into law until the Senate approves the package and the president signs it.