Catholic leaders have voiced concerns that Section 604 of the CLARITY Act could undermine efforts against human trafficking.
A coalition of 80 Catholic leaders and activists has raised alarms regarding Section 604 of the CLARITY Act, expressing concerns that it may weaken the fight against human trafficking and illicit financial activities. They warn that the legislation could create loopholes that transnational criminal organizations might exploit.
This initiative, spearheaded by the Alliance to End Human Trafficking (AEHT), has garnered support from various Catholic organizations. A letter addressing Senate leadership, including Republican Majority Leader John Thune and Democratic Leader Chuck Schumer, outlined these fears.
Section 604, also known as the Blockchain Regulatory Certainty Act, is intended to clarify the regulatory status of non-custodial developers, stating they would not be classified as money transmitters as long as they do not control user funds. However, critics argue that this provision could lead to regulatory ambiguity, impeding the detection of financial activities linked to human trafficking and organized crime.
"The test of any financial system is not only whether it generates wealth or innovation but also whether it protects human life and dignity," the coalition emphasized in their statement.
Kathy Bowler Gozevich, AEHT's Executive Director, highlighted that human traffickers adapt swiftly to technological changes, and that regulatory measures must evolve accordingly. While supporting responsible fintech innovation, she insisted that protections for vulnerable populations must be maintained.
In the cryptocurrency sector, Section 604 is viewed as a beneficial clarification for developers. Cody Carbone, leader of The Digital Chamber, stated that the provision distinguishes between tool creators and entities that manage client funds. Conversely, Coin Center's Executive Director Peter Van Valkenburgh called for a comprehensive version of the BRCA before endorsing the CLARITY Act.
"We do not support Clarity with the stripped version of BRCA proposed by Sen. Cortez Masto. Stand up for developer rights or vote no," he remarked.
A letter signed by various Catholic organization leaders, including those from the Sisters of Saint Joseph of Philadelphia and the Sisters of the Blessed Virgin Mary, signals a united front against the current language in the bill. On May 14, the U.S. Senate Banking Committee passed the CLARITY Act with a vote of 15 to 9, which includes measures to enhance compliance with the Bank Secrecy Act, improve data sharing among law enforcement, and set new standards for cryptocurrency ATMs.
Additionally, the Blockchain Association recently urged the Senate to expedite the CLARITY Act's passage, receiving backing from 160 signatories including former law enforcement and national security officials. However, some industry figures, like JPMorgan CEO Jamie Dimon, have raised issues with the bill, claiming it lacks adequate consumer protections regarding stablecoin issuers' interest on deposits.
