Banks call CLARITY Act "illicit finance-friendly," DeFi begs to differ 🏦💸

The Bank Policy Institute has labeled the CLARITY Act "illicit finance-friendly," arguing the proposed crypto market structure bill would create a "lighter-touch AML regime" by applying anti-money laundering obligations only to a subset of digital asset brokers, dealers, and exchanges. In a policy update published on June 19, the leading U.S. banking industry group said the legislation leaves significant gaps across decentralized finance, unhosted wallets, and other digital asset services that would remain outside the Bank Secrecy Act framework. "This bill is not innovation-friendly; it is illicit finance-friendly," the organization wrote.

BPI said the proposal could make parts of the crypto ecosystem more attractive to illicit actors seeking to avoid law enforcement scrutiny, and warned that the bill does not provide clear authority for the Treasury Department to sanction or regulate mixers, tumblers, and other blockchain-based tools commonly associated with money laundering concerns. The group urged Congress to subject all digital asset service providers and DeFi platforms to anti-money laundering and sanctions compliance requirements and called for Treasury to receive explicit authority over mixers and similar services.

The organization also recommended an "economic benefit" test for decentralized finance, arguing that entities that profit from the operation of DeFi protocols should not be exempt from financial institution obligations simply because the services run on decentralized infrastructure. BPI's recommendations reflect a broader debate between traditional financial institutions and parts of the crypto industry over how compliance obligations should apply to decentralized networks as lawmakers continue deliberations on the CLARITY Act in Washington.