Representatives Scott Fitzgerald, Ben Cline, and Zoe Lofgren have introduced the Promoting Innovation in Blockchain Development Act of 2026, a bipartisan proposal aimed at narrowing how federal money transmission laws apply to blockchain developers.
The legislation specifically addresses Section 1960 of Title 18 of the U.S. Code, which governs unlicensed money transmitting businesses, and seeks to clarify when criminal liability applies in the context of decentralized software.
🚨JUST IN: @RepFitzgerald (R-WI), @RepBenCline (R-VA) and @RepZoeLofgren (D-CA) have just introduced the bipartisan Promoting Innovation in Blockchain Development Act of 2026, aimed at protecting software developers from being prosecuted under criminal code Section 1960.
The…
— Eleanor Terrett (@EleanorTerrett) February 26, 2026
Core Provisions of the Bill
Clarification of Criminal Liability
The bill stipulates that criminal liability under Section 1960 would apply only to entities that exercise control over customer funds.
This distinction draws a line between custodial financial intermediaries and non-custodial software providers, aiming to prevent broad interpretations that extend liability to developers without operational control.
Explicit Protection for Developers
The legislation would explicitly exclude:
- Software developers
- Open-source code contributors
- Protocol maintainers
from being classified as money transmitters solely for writing, publishing, or maintaining blockchain code.
The proposal reinforces the principle that publishing open-source software, in itself, does not constitute financial intermediation.
Response to Prior Enforcement Actions
Lawmakers introduced the bill following high-profile prosecutions involving developers linked to Tornado Cash and Samourai Wallet.
Those cases sparked debate within the industry over whether enforcement actions had extended beyond custodial actors and into the realm of code publication. Supporters of the bill argue that clearer statutory language is necessary to prevent regulatory overreach and to protect non-custodial infrastructure development.
Broader Legislative Context
The bill arrives amid a broader wave of crypto-related legislative activity in early 2026.
- The Clarity Act continues to address digital asset market structure, including the regulatory classification of decentralized finance (DeFi) participants.
- The GENIUS Act recently advanced stablecoin oversight, prompting parallel discussions about safeguarding non-custodial infrastructure.
Industry advocacy groups such as Blockchain Association and DeFi Education Fund have publicly supported the measure, describing it as essential for maintaining U.S. competitiveness in blockchain innovation.
Structural Implications
If enacted, the legislation would formally separate:
- Custodial financial service providers, which hold or control user funds
- Software developers who create or maintain open-source blockchain tools
The bill does not remove anti-money laundering requirements for entities that control customer assets. Instead, it narrows the scope of criminal liability to align with operational control rather than code publication.
Its passage would mark a significant clarification in U.S. crypto policy, particularly in defining how legacy financial statutes apply to decentralized systems. Whether the measure advances will depend on congressional negotiations and parallel progress on broader digital asset legislation.
