“Outlaw code, lose innovation”: White House backs DeFi developer safeguards in CLARITY Act
The White House has thrown its weight behind key protections for decentralized finance (DeFi) software developers, warning that efforts to criminalize code itself could drive financial innovation out of the United States.
Patrick Witt, crypto advisor to former President Donald Trump, emphasized on Friday that these developer protections are “one of the most important aspects” of the CLARITY Act, a sweeping crypto regulatory package currently under Senate review. According to Witt, targeting code instead of conduct would not make the system safer; it would simply encourage innovators and capital to migrate to more permissive jurisdictions.
At the heart of the debate is a set of provisions drawn from the Blockchain Regulatory Certainty Act (BRCA). These provisions seek to ensure that non‑custodial, non‑controlling developers of blockchain software are not treated as “money transmitters” under U.S. law-a designation that carries intensive compliance obligations and, in some cases, criminal liability.
The BRCA, introduced in January 2026 by Senator Cynthia Lummis, clarifies that developers who write, publish, or maintain open‑source code, but do not control user funds or act as intermediaries in transactions, should not be regulated in the same way as payment processors or financial institutions. Lawmakers plan to fold BRCA into the broader CLARITY Act ahead of a Senate markup expected in the second half of April.
Rumors had circulated in Washington that these protections might be sacrificed as part of a political compromise to accelerate passage of the CLARITY Act. Lummis has rejected that speculation, insisting the language remains in place. Witt’s recent comments from the White House side further signal that, at least for now, the developer immunity provisions are being treated as non‑negotiable.
Industry figures quickly welcomed the Administration’s stance. Kristin Smith, president of the Solana Policy Institute, described the protections as “foundational” for the future of open‑source blockchain development. In her view, treating neutral developers as financial intermediaries would effectively criminalize the publication of code and chill legitimate experimentation.
Peter Van Valkenburgh, executive director of advocacy group Coin Center, underscored the broader stakes. If lawmakers “outlaw code,” he argued, they do not merely target bad actors-they “victimize innocent developers, discourage legitimate users, and leave the most powerful tools to criminals.” For Van Valkenburgh, any serious market structure bill must include the BRCA framework; without it, he suggests, the legislation would be structurally incomplete.
Not everyone in the crypto space is convinced the Administration’s support goes far enough. Critics note that if the government were fully committed to protecting developers, it might take a different approach in high‑profile enforcement cases. They point to the prosecution of Roman Storm, a founder of Tornado Cash, a privacy‑focused crypto mixer, as evidence of inconsistency: on one hand, statements defending neutral code; on the other, aggressive legal action involving a developer of open‑source tools.
This tension highlights a deeper policy dilemma: how to distinguish between neutral, general‑purpose software and services designed or operated with clear knowledge of systematic criminal abuse. The CLARITY Act and BRCA attempt to draw that line by focusing on control. Developers who do not custody assets, route payments, or make individualized decisions about user transactions would be shielded from being treated as money transmitters. Those who operate interfaces or infrastructure that directly manage funds would still face conventional regulatory obligations.
Beyond the developer provisions, the CLARITY Act is entangled in a broader standoff over stablecoin yields and the treatment of interest‑bearing stablecoin products. Analysts at investment bank TD Cowen warn that this deadlock could delay the entire bill, potentially preventing it from becoming law this year. The political calendar is a major constraint: with midterm elections looming in November, lawmakers have limited time and appetite for contentious financial legislation.
Key dates are approaching quickly. Late April is being watched for a potential markup in the Senate Banking Committee, a crucial step before any floor vote. If the bill clears that hurdle, the next milestone would be a Senate floor vote expected around late May. TD Cowen suggests that if there is no tangible progress by then, the CLARITY Act is likely to be kicked into 2027, with its fate heavily dependent on which party controls Congress after the midterms.
For the DeFi sector, the stakes are high. Developer protections are not just an abstract legal debate; they determine where teams choose to build, list tokens, and launch protocols. If non‑custodial developers fear personal liability merely for publishing smart contracts or wallet software, many may choose to incorporate abroad, limiting U.S. oversight and depriving the American market of cutting‑edge innovation.
Supporters of BRCA argue that regulatory certainty can coexist with strong enforcement. Their position is that law should target conduct-fraud, market manipulation, money laundering-not the mere act of writing code. Under this view, developers should face liability when they cross the line into running custodial services, misleading users, or intentionally facilitating crime, but not simply for authoring tools that are neutral in design and widely used for lawful purposes.
Opponents and skeptics, however, warn that sophisticated bad actors increasingly hide behind the rhetoric of “just writing code” while operating systems that are, in practice, indistinguishable from unlicensed financial institutions. They worry that overly broad safe harbors could become loopholes for offshore exchanges, anonymous mixers, and leveraged platforms that systematically evade anti‑money‑laundering and consumer‑protection rules.
The CLARITY Act proposes to resolve some of these concerns by defining roles more precisely. In theory, a distinction would be drawn between:
– infrastructure providers and open‑source developers, who do not intermediate transactions, and
– custodial services, centralized interfaces, and entities that directly hold or move customer funds.
If implemented as currently envisioned, this approach could help regulators focus resources on high‑risk intermediaries while allowing low‑risk infrastructure and research to flourish. The challenge lies in drafting definitions robust enough to survive real‑world edge cases-such as semi‑custodial smart contracts, hybrid DeFi‑CeFi platforms, and protocol governance structures where developers retain significant influence without formal control.
From an innovation standpoint, the White House’s endorsement signals recognition that the U.S. is in a global race to shape the next generation of financial rails. Jurisdictions in Europe, Asia, and the Middle East are competing to attract crypto talent and capital with clearer rulebooks. If American policymakers misstep, industry leaders warn, the most ambitious DeFi projects may simply settle elsewhere, leaving U.S. regulators with less visibility and leverage over a system that will continue to grow regardless.
At the same time, consumer advocates and traditional financial institutions are watching the process closely. They want reassurance that DeFi will not become a parallel shadow system where retail investors face opaque risks and little recourse. The CLARITY Act’s final form will likely influence how comfortable institutional capital feels in engaging with on‑chain markets, especially in areas like tokenized securities, stablecoins, and on‑chain lending.
The unresolved case of Roman Storm and similar enforcement actions will remain a litmus test for how seriously authorities take their own rhetoric about protecting developers. Even with statutory safeguards, much will depend on how regulators and prosecutors interpret “control,” “facilitation,” and “intent” in practice. Industry lawyers are already preparing for a future where court decisions, not just legislation, define the boundaries of liability.
For now, the message from the White House is clear: banning or criminalizing code is seen as incompatible with America’s ambition to lead in financial technology. Whether Congress can translate that principle into precise, workable law-and do so on a tight electoral timeline-will determine if the CLARITY Act becomes a cornerstone of U.S. crypto policy in this decade or just another stalled experiment revisited years later.