Bipartisan legislation targets developer protections
A group of lawmakers from both parties introduced a bill on Thursday that could change how the legal system treats decentralized software developers. The Promoting Innovation in Blockchain Development Act seeks to amend existing criminal statutes that have been used to prosecute crypto developers in recent cases.
What’s interesting here is the timing. This comes as broader crypto market structure legislation has been stalled for months. The new bill actually goes further than what’s being discussed in that larger package, but sources say it shouldn’t be seen as a replacement or an admission that the market structure bill is too weak. It’s more like a parallel effort, I think.
The legal problem they’re trying to fix
The bill specifically targets U.S. code 1960, which defines illegal money transmitting businesses. This statute has been used successfully by both the Biden and Trump administrations against crypto developers. The legislation would clarify that the law only applies to individuals who “exercise control over currency.”
We’ve seen this play out in court already. Last year, an Ethereum developer was convicted for creating Tornado Cash, a privacy tool. He argued that because the software was decentralized and he didn’t control user funds, he shouldn’t be considered a money transmitter. The jury disagreed.
Then, more recently, the Justice Department secured guilty pleas from two Bitcoin developers behind Samourai Wallet under the same statute. Both are now serving prison sentences.
Industry reaction and broader context
The DeFi Education Fund, an industry advocacy group, called the bill “critically important for engineers.” They say it clarifies that developers who don’t take custody of funds can build technology without fear of being treated like financial intermediaries.
Meanwhile, the larger market structure bill is still hanging in the balance. It’s likely to include some language about code 1960, but not actually rewrite the statute. Instead, it would order that “non-controlling developers” not be treated as money transmitters under that law.
But here’s where things get messy. The DeFi language in the market structure bill isn’t finalized yet. Sources suggest it probably won’t be the issue that kills the legislation, though. There are bigger fights happening around stablecoin rewards and conflicts of interest language related to President Trump’s crypto ventures.
The ticking clock
Lawmakers are saying the market structure bill needs to make progress in the coming weeks, or it risks getting lost as Congress slows down ahead of the midterms. It’s a familiar pattern in Washington—legislation that seems promising but gets bogged down in details and timing.
What strikes me about this new developer protection bill is how specific it is. It’s not trying to solve all of crypto’s regulatory problems. It’s focused on one particular legal vulnerability that has put developers in prison. That might be why it has bipartisan support—it addresses a clear problem without getting into the more contentious debates about market structure.
Still, I wonder if this approach of tackling smaller pieces separately will work better than trying to pass one comprehensive bill. The crypto industry has been waiting for regulatory clarity for years, and the clock keeps ticking.
