- Bipartisan bill clarifies that Section 1960 applies only to entities controlling customer funds.
- Noncustodial open-source developers excluded from money transmitter classification.
- Industry groups back the measure and urge House Judiciary Committee approval.
A bipartisan group of U.S. lawmakers has introduced legislation intended to narrow the scope of federal criminal liability for blockchain software developers. The Promoting Innovation in Blockchain Development Act of 2026 seeks to clarify how Section 1960 of Title 18 of the U.S. Code applies to individuals who write code but do not control or custody customer funds.
The bill was introduced by Representatives Scott Fitzgerald (R-WI), Ben Cline (R-VA), and Zoe Lofgren (D-CA), who have drawn public support from industry advocacy groups focused on digital assets and decentralized finance.
Bill Targets Scope of Criminal Code Section 1960
Section 1960 imposes criminal penalties for operating an unlicensed money transmitting business. According to the bill’s sponsors and supporting organizations, the legislation would clarify that the statute applies only to parties that control customer assets and transmit funds on behalf of customers.
The proposal aligns the statutory language with what supporters describe as longstanding Treasury Department guidance. Under the bill, developers who create noncustodial, noncontrolling open-source software would not be classified as money transmitting business operators solely for writing code that enables users to transfer their own funds.
Advocacy groups stated that the clarification is intended to address concerns that software engineers could face criminal liability under an interpretation of Section 1960 that extends beyond custodial financial intermediaries.
Industry Groups Voice Support
The Blockchain Association and the DeFi Education Fund both issued statements in support of the measure. Summer Mersinger, chief executive officer of the Blockchain Association, noted that the legislation would provide legal certainty for developers of noncustodial technologies while maintaining accountability for bad actors.
The DeFi Education Fund described protection from what it called the misapplication of 18 U.S.C. § 1960 as its top policy priority. The organization stated that developers who do not custody or control user funds should not face criminal charges for building open-source tools that allow users to move their own assets.
Both groups urged the House Judiciary Committee to advance the bill. They also thanked the three sponsors for introducing the bipartisan measure.
In addition, based on the summary shared by supporters, the Promoting Innovation in Blockchain Development Act explains that criminal liability under Section 1960 is limited to entities that exercise control over customer assets. The bill is framed as a statutory clarification rather than a new regulatory framework.
Related: Lummis and Wyden Introduce Bill Exempting Blockchain Developers From Money Transmitter Rules
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Source: https://coinedition.com/u-s-lawmakers-introduce-bill-to-protect-blockchain-developers/
