On February 26, 2026, a bipartisan group of U.S. House members introduced the Promoting Innovation in Blockchain Development Act of 2026 (the “Blockchain Development Act”), a narrowly targeted but potentially consequential piece of legislation aimed at clarifying criminal liability for blockchain software developers. Sponsored by Representatives Scott Fitzgerald (R‑WI), Ben Cline (R‑VA), and Zoe Lofgren (D‑CA), the bill responds directly to years of legal uncertainty surrounding whether developers of noncustodial, open‑source blockchain software can be prosecuted as unlicensed “money transmitters” under federal criminal law.
Although quite modest in length, the proposal sits at the intersection of criminal law, financial regulation, and emerging technology policy. If enacted, it would mark one of Congress’s clearest efforts to date to draw a line between writing code and operating a financial intermediary. (The official text of the legislation does not appear yet on Congress.gov but has been reported on other websites).
The Legal Backdrop: Section 1960 and “Regulation by Prosecution”
At the heart of the Blockchain Development Act is Section 1960 of the U.S. Criminal Code, a statute originally designed to target traditional money services businesses—entities that receive, hold, and transmit funds on behalf of customers—that operated without proper licensing.
High‑profile prosecutions—including those involving Tornado Cash and Samourai Wallet—have intensified debate over whether software development alone can trigger criminal liability when developers do not custody assets, execute transactions, or exercise control over users’ funds. Industry groups have described this approach as “regulation by prosecution.” This “developer-as-transmitter” theory created a chilling effect: if writing code that someone else uses for a transaction makes you a felon, why build in the United States?
What the Blockchain Development Act Actually Does
To be clear, the Blockchain Development Act does not create a broad safe harbor for all blockchain activity. Instead, it seeks to codify a common-sense distinction: Control matters. Thus, the bill proposes an amendment to the definition in Section 1960(a) to add the underlined words: “(a) Whoever knowingly exercises control over currency, funds, or other value that substitutes for currency, and conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.”
Co-sponsor Rep. Cline said the following on X: “For too long, federal overreach has blurred the line between bad actors and the innovators building next-generation technology. This bipartisan bill restores needed clarity by protecting developers who don’t control customer funds, while ensuring law enforcement can continue to target real criminals. The bill has strong support from the DeFi Education Fund (see their blog post) and, reportedly, from the Blockchain Association as well.
Next Steps
The Bill (HR 7332) was referred to the House Committee on the Judiciary, as of February 26, 2026. It should also be noted that Senators Lummis (R-WY) and Wyden (D-OR) introduced the Blockchain Regulatory Certainty Act of 2026 (S. 3611) in January 2026. Like the House bill, this bipartisan legislation clarifies that blockchain developers and service providers who do not control user funds are not money transmitters under federal law, and establishes a clear federal standard exempting “non-controlling developers”—those who write code or maintain infrastructure but do not have the unilateral ability to execute transactions—from the licensing requirements of Section 1960. The Senate bill has been referred to the Committee on Banking, Housing, and Urban Affairs.
By clarifying the scope of Section 1960, the Blockchain Development Act attempts to realign criminal law with technological reality and long‑standing regulatory principles. For developers, firms, and policymakers alike, it represents an important step toward replacing uncertainty with statutory clarity—and toward deciding whether the next generation of financial infrastructure will be built in the United States or elsewhere.
