Code is Not a Crime
Why the CLARITY Act Must Protect the Builders
Locksmiths don’t go to prison when burglars pick a lock. Car manufacturers aren’t at fault when cars hit pedestrians. And Smith & Wesson isn’t guilty of murder even though they manufacture guns that do.
If the CLARITY Act is going to mean anything at all, it must amend or eliminate Statute 18 U.S.C. § 1960 subsection (b)(1)(C).
Today, we’ll look at the CLARITY ACT, Balancing Freedom & Security, and why protection for Developers is essential if we want to become the “Crypto Capital" of the World.
Because at the end of the day, if it's worth doing (the CLARITY Act), it’s worth doing right.
The CLARITY Act
So, what exactly is the CLARITY Act trying to accomplish? Listed below are the primary objectives of the legislation.
Remain the Global Financial Capital in the Digital Age.
Generate global on-chain demand for U.S. Treasuries to help fund the U.S. Gov.
Drive financial innovation back onshore.
Provide clear rules of the road for institutions to get involved.
Block a Central Bank Digital Currency (CBDC)
And strike the appropriate balance of freedom/security for individuals.
The sixth point is often the most overlooked, yet arguably the most important objective to get right.
The majority of Bitcoiners are Freedom Maximalists. And when I say Freedom, I’m referring to the Negative variety. Freedom from coercion, from interference, from a state that decides what you may do, say, write, build, transact, or believe. It’s these negative freedoms that make our Bill of Rights so robust.
Contrast that with Positive Freedoms. Positive Freedoms are meant to make you feel more secure. Essentially, they give you the Freedom to act if and only if the government permits it. They’re enabled, managed, structured, and ultimately defined by the state.
Every authoritarian project of the modern era, from Jacobin France to the Soviet Union and the Modern CCP, is at its core a positive-freedom project.
And on the whole, the drafters of the CLARITY Act have done a pretty darn good job of balancing negative/positive freedoms. The Banning of a CBDC stands out as the most important protection of negative freedom in the Bill.
The crux of my argument here is that the more authoritarian we lean with this legislation, the less likely we are to attract talent back to our shores, and ultimately, the more likely we are to watch our position as the Global Financial Capital slip through our hands.
So let’s dig into why…
Protecting Developers is Important
Software developers write the code that powers the financial tools we use.
And Bitcoin developers are building these tools to expand our negative freedom.
Want to send money to anyone anywhere at a moment's notice without the permission of a bank, government, or “trusted” intermediary? No problem.
Want to hold the “keys” to your wealth in your brain, freeing yourself from the risk of bank failure, currency crisis, or government confiscation? No problem.
Want to protect your transaction history and make sure your wallet isn’t being tracked/traced? No problem.
Most people want these tools for themselves… But, they’d go out of their way in order to deny them to their adversaries.
The thing is… Bitcoin doesn’t discriminate. It’s apolitical money for your friends and your enemies.
And because certain tools built on top of Bitcoin might be used by criminals, terrorists, and the like, developers who create said tools are being charged with crimes.
Statute 18 U.S.C. § 1960 is included under the Blockchain Regulatory Certainty Act (BRCA) component of the CLARITY Act. Originally, the statute was enacted in 1992 to catch hawala operators moving drug money in suitcases, and today it is being misapplied to pursue Bitcoin developers.
Subsection (b)(1)(C) of 18 U.S.C. § 1960 requires no license, no registration, and no single penny of customer custody. It requires only that "funds" be "transmitted" and that the defendant "know" those funds were derived from or intended for unlawful activity.
So, developers, who never had custody or control of the funds, are being treated like hawala operators, who actually did have custody and control of the funds.
Back to the gun analogy… You create a gun so people can hunt animals to feed their families. But the gun is used by someone to murder an innocent child. Are you guilty of murder for creating the gun?
The point is… tools are amoral. And therefore, tool creators should not be punished for creating tools.
A more workable version of Section (C) would read as follows: “the defendant personally receives, holds, controls, or unilaterally directs the routing of funds that are known to the defendant to have been derived from a specific criminal offense or are intended to be used to promote or support a specific unlawful activity.”
This will ensure that we’re focusing all our efforts on pursuing the people who use the tool for evil, rather than the tool's creator.
Getting it Right
Because… you see, America was built on the proposition that the freest country on earth would be the richest, and it is negative freedom that brings the builders home.
Half of our developers are already gone. And approximately 90% of the exchange volume is already offshore.
It’s time to change that calculus… It’s time to stop punishing the builders, criminalizing the publication of code, and handing prosecutors a loaded statute. Statute that they’ve already proven they will misuse.
Because if we don’t, the next generation of financial infrastructure is likely to be built in Singapore, Dubai, or Zurich. And it’ll likely be built by Americans who took their laptops and their genius somewhere they could work without fear.
The CLARITY Act can either bring them home or send them away.
Subsection (b)(1)(C), as written, accomplishes the latter. Be sure to call your Senator and help us accomplish the former.
Until Next Time ✌️
