A leading U.S. banking industry group has criticized the CLARITY Act’s approach to anti-money laundering compliance. It argues that the proposed crypto market structure bill leaves significant gaps across decentralized finance and other digital asset services.
In a policy update published on June 19, the Bank Policy Institute [BPI] said the legislation would create a “lighter-touch AML regime” by applying anti-money laundering obligations only to certain digital asset brokers, dealers, and exchanges, while leaving other parts of the crypto ecosystem outside the framework.
“This bill is not innovation-friendly; it is illicit finance-friendly,” the organization wrote.
The comments come as lawmakers continue debating the CLARITY Act, one of the most significant crypto market structure proposals currently under consideration in Washington.
Banking group warns of DeFi compliance gaps
According to BPI, the bill leaves several areas of the digital asset ecosystem outside traditional anti-money laundering requirements.
The organization argued that decentralized finance providers, unhosted wallets, and certain digital asset service providers would remain beyond the scope of Bank Secrecy Act obligations under the current framework.
BPI said the proposal could make parts of the crypto ecosystem more attractive to illicit actors seeking to avoid law enforcement scrutiny.
The group also argued that the legislation 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.
BPI pushes for broader oversight
To address what it describes as regulatory gaps, BPI urged Congress to subject all digital asset service providers and DeFi platforms to anti-money laundering and sanctions compliance requirements.
The group also called for Treasury to receive explicit authority to regulate or sanction mixers and similar services.
In addition, BPI recommended an “economic benefit” test for decentralized finance. It argues that entities that profit from the operation of DeFi protocols should not be exempt from financial institution obligations simply because services operate through decentralized infrastructure.
The recommendations reflect a broader debate between traditional financial institutions and parts of the crypto industry over how compliance obligations should apply to decentralized networks.
Final Summary
- The Bank Policy Institute said the CLARITY Act leaves anti-money laundering gaps across DeFi, unhosted wallets, and certain digital asset service providers.
- The banking group urged Congress to expand compliance requirements and grant Treasury broader authority over mixers and other blockchain-based services.
