Cardano Founder Charles Hoskinson Criticizes Push to Remove CLARITY Act Developer Protections

TLDR

• Charles Hoskinson opposed efforts to remove Section 604 from the CLARITY Act.
• Section 604 protects non-controlling crypto developers from money transmitter liability.
• The Fraternal Order of Police urged Senators Tim Scott and Elizabeth Warren to remove it.
• The police group said Section 604 could weaken financial crime enforcement tools.
• Hoskinson said developer liability could push crypto toward closed permissioned systems.

Cardano founder Charles Hoskinson criticized efforts to remove Section 604 from the Digital Asset Market CLARITY Act, saying the proposal could expose open-source crypto developers to legal risk for actions carried out by unrelated third parties.

The debate centers on whether developers who publish open-source blockchain software should be protected from being treated as money transmitters when they do not control user funds. Section 604 is intended to shield non-controlling developers, wallet providers and infrastructure builders from liability under money transmission laws.

Charles Hoskinson responded after the Fraternal Order of Police urged Senate Banking Committee Chairman Tim Scott and Ranking Member Elizabeth Warren to remove the section from the bill. The organization argued that the provision could weaken law enforcement’s ability to pursue criminals using digital assets.

The Fraternal Order of Police, which says it represents more than 382,000 members, said Section 604 could limit statutes used by prosecutors to investigate and bring cases against criminal networks operating through digital asset systems.

Charles Hoskinson Defends Open-Source Developers

Hoskinson rejected the law enforcement group’s argument, saying it misunderstands how open-source blockchain software works. He said developers can write and publish code without knowing who will use it or how it will be used later.

He compared the situation to an author being blamed for a crime committed by a reader who acted independently. His point was that creating a tool or publishing work should not automatically make the creator responsible for every misuse by strangers.

Charles Hoskinson said such a standard could push crypto development away from open systems and toward closed, permissioned networks. He argued that developers may avoid public blockchain infrastructure if legal exposure becomes too broad.

His comments reflect a wider concern among crypto developers and industry groups. Many argue that non-custodial software, privacy tools, decentralized applications and blockchain infrastructure should not be regulated the same way as companies that hold or transfer customer funds.

Police Group Warns on Enforcement Tools

The Fraternal Order of Police took the opposite view. In its letter, the group said Section 604 could make it harder for law enforcement to track and prosecute criminals using cryptocurrency.

The group subsequently said that exempting non-controlling developers and providers from money transmission rules could create legal gaps. It argued that prosecutors need the ability to pursue those who help criminal organizations profit through digital assets.

The organization said it supports the right to trade digital assets, but it wants law enforcement to retain tools used in financial crime investigations. Its concern is that broad developer protections may make some crypto services harder to police.

Supporters of Section 604 argue that the provision does not stop law enforcement from using blockchain analytics, subpoenas, exchange records or other investigative tools. They say the section only prevents developers from being held liable when they do not custody assets, direct transactions or control user funds.

The dispute shows the challenge facing lawmakers as they try to separate software development from financial intermediation.

CLARITY Act Debate Moves Toward Vote

The Section 604 dispute is part of a larger debate over the CLARITY Act, which aims to create a federal framework for digital asset markets in the United States.

The bill covers token classification, market oversight, stablecoin rules, decentralized finance, developer protections and law enforcement authority. The Senate Banking Committee is expected to review and vote on the legislation this week.

Crypto firms and developer groups have pushed for clear legal protections for open-source builders. They argue that software developers should not face criminal or civil liability simply because others use publicly available code for illegal activity.

Law enforcement groups and some lawmakers remain concerned that too much protection could allow bad actors to hide behind decentralized platforms and non-custodial tools.

The outcome of the Section 604 debate as a result could shape how crypto infrastructure is built in the United States. If the provision remains in the bill, developers may receive clearer protection when they do not control customer funds. If it is removed or narrowed, open-source crypto builders may face greater legal uncertainty.

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