TLDR
A new bipartisan House bill aims to narrow U.S. money?transmitter criminal law so noncustodial DeFi and blockchain developers are not prosecuted as if they run payment businesses.
- The Promoting Innovation in Blockchain Development Act would amend Section 1960 so it applies only to actors who control others funds, not developers who just write or publish code.
- The bill responds to prosecutions of privacy and DeFi tools like Tornado Cash and Samourai Wallet, and could materially reduce legal risk for U.S. based DeFi and open?source development.
- It is only a proposal for now, and its impact will depend on whether it passes alongside broader market structure bills such as the CLARITY Act and how courts and regulators interpret it.
Deep Dive
1. What The Bill Actually Does
Representatives Scott Fitzgerald, Ben Cline, and Zoe Lofgren have introduced the Promoting Innovation in Blockchain Development Act of 2026, a bipartisan bill targeting 18 U.S.C. Section 1960, the federal illegal money transmitting statute. Reports from Decrypt and Yahoo Finance say it would revise Section 1960 so it only covers individuals who exercise control over currency or digital assets, explicitly excluding noncustodial developers who do not hold customer funds.DeFi bill coverage
Coverage from CryptoBriefing and Cointelegraph adds that the goal is to protect open?source blockchain and DeFi developers from criminal liability under money?transmission law when they simply write or maintain code, without acting as intermediaries that custody funds.Developer protection billblockchain dev protection
If passed as written, the key legal test under this statute would be whether you actually control user assets, not whether you wrote code that others use.
2. Why It Matters For DeFi And Privacy Tools
Section 1960 has been used against developers of privacy and self?custody tools that argued they were not money transmitters, including the Tornado Cash and Samourai Wallet teams.case background Advocacy groups like the DeFi Education Fund and the Blockchain Association call the new bill critically important, saying it clarifies that engineers building neutral, noncustodial software are not the same as financial intermediaries.industry viewadvocacy context
If this passes, it could encourage more DeFi and infrastructure development to stay onshore in the U.S., rather than pushing teams to friendlier jurisdictions. However, it does not shield custodial services, and it does not touch other legal regimes like sanctions, securities law, or AML requirements.
For serious DeFi teams, the bill could reduce personal criminal risk around noncustodial code, but it does not make DeFi unregulated or remove compliance obligations where they actually hold user funds.
3. Legislative Path And Open Questions
This is a House bill at an early stage, not yet law, and would likely need to move alongside or in coordination with broader market structure legislation such as the CLARITY Act and related Senate efforts like the Blockchain Regulatory Certainty Act.market?structure contextbroader policy view
Key uncertainties remain. It is unclear whether any final statute would apply retroactively to existing convictions or pending cases, and regulators could still pursue developers under other laws if they believe a project crosses into custodial or sanctioned activity.
For now, this is a strong signal of shifting U.S. policy toward clearer protections for noncustodial builders, but teams should watch how the bill evolves in committee, how it meshes with CLARITY, and whether courts narrow or broaden its effect.
Conclusion
U.S. lawmakers are trying to draw a clearer line between writing open?source DeFi code and running a money services business, which, if enacted, would lower criminal risk for noncustodial developers. The ultimate impact on DeFi, privacy tools, and U.S. crypto competitiveness will hinge on whether this bill survives the legislative process largely intact and how it interacts with the broader digital?asset market structure framework now being negotiated.
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