Representatives Scott Fitzgerald, Ben Cline, and Zoe Lofgren today introduced the Promoting Innovation in Blockchain Development Act of 2026, a bipartisan measure designed to shield software developers from criminal liability under federal money transmission laws.
The legislation aims to narrow the scope of 18 U.S.C. Section 1960, clarifying that the statute targets entities with custody over user funds rather than programmers who merely write or maintain open-source code.
Backers of the bill contend that Section 1960 was crafted decades ago for traditional financial intermediaries, not decentralized protocols. Enforcement agencies have increasingly applied it to noncustodial tools, creating uncertainty across the decentralized finance sector.
The proposal emerges amid ongoing congressional deliberations over the Clarity Act and broader digital-asset market structure legislation, where the treatment of DeFi developers remains contentious.
The bill responds directly to high-profile prosecutions that have tested the boundaries of money transmission law. The Treasury Department designated Tornado Cash, a privacy-focused mixing protocol, in August 2022, though the Fifth Circuit Court of Appeals vacated those sanctions in November 2024.
Federal prosecutors charged Tornado Cash co-founders Roman Storm and Roman Semenov in August 2023, alleging conspiracy to operate an unlicensed money transmitting business. A jury found Storm guilty on that count in August 2025 while failing to reach verdicts on additional charges.
Separately, Dutch authorities convicted developer Alexey Pertsev in May 2024, sentencing him to more than five years for laundering offenses connected to the protocol.
Industry advocates also cite the Samourai Wallet prosecution in the Southern District of New York, where the project’s leadership entered guilty pleas in August 2025 and received prison terms by November 2025, further intensifying debate over whether distributing software can equate to running a custody operation.
Editor’s note: The development was first reported by Eleanor Terrett on X.