CRYPTOCURRENCY

Law enforcement, banks warn of money laundering gaps in major US crypto bill

The crypto industry and law enforcement groups are in the midst of a lobbying showdown over the proposed Clarity Act.

By Brenda Medina and Spencer Woodman Image: Jessica Rodriguez Rivas via Wikimedia Commons (CC BY-SA-4.0) June 24, 2026

Law enforcement associations, anti-corruption advocates and a major banking group are warning that a new bill aimed at regulating the United States’ cryptocurrency industry could leave big gaps in safeguards against dirty money in digital currencies that have already become a financial vehicle for organized crime.

Known as the Clarity Act, the bill seeks to bring cryptocurrency under a single legal framework on the national level, ending years of the industry operating in gray areas. Crypto companies and President Donald Trump have heavily championed the bill. Defenders of the bill say that it fills a crucial regulatory vacuum and provides law enforcement with new tools to address crime. But critics argue it contains dangerous loopholes and prioritizes studies and pilot programs instead of holding all crypto services to stringent anti-money laundering standards.

This is largely window-dressing type regulation.

— Gary Kalman, executive director of Transparency International U.S.

In recent months, law enforcement groups including the National Sheriffs’ Association and the National Association of Assistant U.S. Attorneys have sent letters to lawmakers voicing a common concern: They argue that the bill could create regulatory exemptions for certain decentralized and automated cryptocurrency services that criminals often rely on to obfuscate their fund flows.

Yesterday, four law enforcement groups representing police chiefs, sheriffs and prosecutors told the acting U.S. Attorney General that, despite discussions with senior officials across the Trump administration, their concern that the bill’s “broad exemptions could create gaps in oversight and accountability that sophisticated criminal actors may exploit” remains unresolved. The letter said its signatories represent more than 70,000 law enforcement professionals across the U.S.

“Criminal organizations increasingly utilize digital assets to facilitate and conceal unlawful activity, including narcotics trafficking, fraud, child exploitation, ransomware attacks, sanctions evasion, terrorism financing, organized retail crime, and other forms of transnational criminal activity,” the letter states, pointing to exemptions for some decentralized businesses. “Regulatory certainty should not come at the expense of accountability, transparency, victim protection, or public safety.”

Key industry players disagree with these groups’ criticisms of the bill. The bill’s alleged loophole for decentralized services “does not exist,” Robin Cook, the director of U.S. Policy at the crypto giant Coinbase, told ICIJ in an interview. Cook points to a section 301 of the bill that he says will in fact bring most automated trading protocols under traditional anti-money laundering requirements.

“It is bringing new regulation at the federal level where there isn’t any today,” Cook told ICIJ. “That is not a deregulatory bill. The idea that somehow this is deregulatory is demonstrably false.”

The Coin Laundry, an investigation by the International Consortium of Investigative Journalists and 37 partner publications, found that criminals and other suspect actors commonly relied on decentralized trading protocols that can help make financial trails harder for law enforcement to trace.

ICIJ examined hundreds of millions of dollars worth of cryptocurrency linked to alleged scammers or North Korean hackers moving through decentralized protocols, where suspect transfers and legitimate funds can interact or mix together in systems that move vast sums of crypto. Some of these automated trading services are known to conduct sparse identity checks of users and some of these services can be more difficult to trace funds through than others.

These swapping services can make it harder for compliance staff at exchanges to determine the origin of crypto assets sent through them when monitoring transactions for suspicious activity. “After the money comes out of the swaps, most exchanges treat it as clean money,” John Griffin, a University of Texas professor who has studied illicit finance in cryptocurrency, told ICIJ last year. “[This] gives them plausible deniability.”

Crypto industry responds

The Clarity Act has been the subject of significant lobbying efforts this year, according to Open Secrets, a nonprofit organization that tracks political spending. This data shows that Coinbase, an outspoken proponent of the legislation, is one of the top filers of lobbying disclosure reports relating to the bill. A number of crypto firms associated with automated trading protocols also have hired lobbyists in relation to the bill.

In an apparent response to pushback against parts of the Clarity Act from law enforcement, a crypto industry group this month sent what it described on its website as a “Blockchain Association Letter From Law Enforcement” to the Senate, with various high-profile former law enforcement signatories backing the bill as it currently stands. These signatories included former FBI special agents, former federal prosecutors and a former chief of the Justice Department’s money laundering section.

The vast majority of officials on the letter’s first several pages featuring its highest profile signatories currently work at major crypto firms, including 11 signatories who now work at Coinbase and two signatories who work at OKX, according to an analysis of online profiles. The letter identified these signatories as Blockchain Association members but does not name the current company affiliation of these officials.