Sheriffs drop their objection to CLARITY Act — crypto's bipartisan showdown just got a little less wild west 🤠

The Major County Sheriffs of America (MCSA) has shifted its position on the CLARITY Act to "neutral" after raising concerns about how the bill would affect illicit finance investigations, according to a Friday letter to Senate Banking Committee chair Tim Scott and Senator Elizabeth Warren. The law enforcement group had outlined those concerns in a May 14 letter, specifically targeting Section 604 of the bill, which incorporates the Blockchain Regulatory Certainty Act and seeks to shield developers from liability for illicit activity committed by users on their decentralized platforms. The MCSA had argued the provision could create a loophole that makes it harder for law enforcement to investigate crypto-related crimes.

The bill, which has bipartisan support, has been awaiting a full Senate vote since May, when the Senate Banking Committee passed it mostly along party lines. Its progress has been stalled largely by banking groups seeking to restrict stablecoin yield, which they contend functions like an unregulated deposit product and could trigger trillions of dollars in outflows from the traditional banking system. Senators backing the bill are pushing for a full Senate vote this month, hoping it can be enacted before the US midterm elections in November.

Crypto investor Mark Chadwick characterized the MCSA's initial opposition as one of the "biggest roadblocks" preventing the Senate from passing the CLARITY Act. "With that hurdle now out of the way, the path to passage just got a lot clearer," Chadwick said. "One more major hurdle down."

The MCSA said it would still like the CLARITY Act to be amended so that state law enforcement is included in Section 309, which requires the Treasury Department to study decentralized finance and illicit finance risks. MCSA President Bob Gualtieri said Congress should supply the training, technology and resources needed to "investigate increasingly sophisticated digital asset-enabled activity" tied to fraud, narcotics trafficking, ransomware, child exploitation, terrorism financing and other crimes. "State and local law enforcement agencies investigate these crimes every day and must have the tools, partnerships, and resources necessary to identify offenders, trace illicit proceeds, recover assets, and protect victims," Gualtieri said.