Developer liability protection is a legal carve-out that prevents software creators and non-custodial providers from criminal prosecution for users’ illicit actions. The Senate crypto market structure bill must include explicit immunity for developers to preserve open-source innovation and keep blockchain infrastructure in the U.S.
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114 signatories demand nationwide developer liability protection.
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Coalition asks Senate to preempt conflicting state laws and clarify money-transmission exclusions.
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Recent DOJ prosecution of a developer (Tornado Cash case) heightens industry urgency for statutory clarity.
developer liability protection: Senate market structure bill must shield software developers from criminal charges to protect open-source innovation—read demands and next steps.
What is developer liability protection in the crypto market structure bill?
Developer liability protection is statutory language that prevents prosecutors from treating software authors and non-custodial service providers as criminally liable for users’ misuse of open-source code. It clarifies that publishing or maintaining neutral blockchain software is not equivalent to operating a money-transmitting business.
How would the bill shield software developers from criminal liability?
The coalition requests explicit exemptions from prosecution under 18 U.S.C. §1960 and similar statutes. The proposed protections would:
- Exclude non-custodial, decentralized code from money-transmitter definitions.
- Preempt state laws that impose conflicting liability standards.
- Protect open-source distribution and maintenance activities absent custody or control of user funds.
Industry leaders—including signatories such as Andreessen Horowitz, Coinbase, Grayscale, Kraken, Paradigm, Solana Labs, and Uniswap Labs—argue these steps are necessary to prevent a chilling effect on development.
Why are crypto and tech groups united on this issue?
Signers coordinated by the DeFi Education Fund and the Chamber of Progress emphasize that public blockchains are neutral infrastructure, akin to roads or the internet. They argue legal exposure for developers would drive talent and infrastructure development offshore.
Recent enforcement action—most notably the prosecution of a software developer tied to Tornado Cash—served as a catalyst for the letter. Industry sources say some senators may seek language that could criminally implicate developers whose code is used in illicit activity.
What did the coalition specifically request?
The letter asks the Senate to:
- Explicitly exempt software developers and non-custodial service providers from money-transmission statutes when they do not control user funds.
- Ensure federal preemption of conflicting state laws.
- Adopt the House CLARITY Act language as a floor and strengthen it with developer protections.
Frequently Asked Questions
Will the Senate bill remove criminal risk for all blockchain developers?
The proposed protections aim to cover developers of truly decentralized, non-custodial software. Developers who take custody, control user funds, or act as intermediaries would not be shielded. The coalition urges precise statutory definitions to prevent ambiguity.
How did previous DOJ actions influence this demand?
Prosecutions such as the Tornado Cash case, and subsequent DOJ statements narrowing enforcement, prompted industry leaders to seek clear legislative protections rather than rely on shifting enforcement guidance.
How can stakeholders support explicit developer protections?
Practical steps recommended by the coalition include legislative outreach, industry coordination, and clear statutory drafting that distinguishes non-custodial software activity from money transmission. Leaders urge Congress to adopt preemption and targeted exemptions.
| Aspect | House CLARITY Act | Coalition Demands |
|---|---|---|
| DeFi treatment | Provides carve-outs for some on-chain activity | Calls for broader, explicit developer immunity |
| State preemption | Limited language | Requests full federal preemption of conflicting state laws |
| Money-transmission risk | Unclear for developers | Explicit exclusion from 18 U.S.C. §1960 for non-custodial developers |
Key Takeaways
- Broad coalition pressure: 114 signatories demand nationwide legal protections to continue U.S.-based blockchain development.
- Legislative clarity required: Explicit exclusions and federal preemption are central asks to avoid uneven state enforcement.
- Practical impact: Without protections, open-source development and non-custodial innovation risk being driven offshore.
Conclusion
Top crypto and tech groups have united to demand explicit developer liability protection in the Senate market structure bill to preserve innovation and prevent prosecutorial uncertainty. Congress faces a decision that will shape where blockchain infrastructure is built; stakeholders should monitor Senate drafting and support clear statutory language.
