Congress Introduces Bill to Shield Open‑Source Developers From Money‑Transmitter Prosecutions

A bipartisan push to shield blockchain developers moved forward on Feb. 26 as lawmakers introduced the Promoting Innovation in Blockchain Development Act — a bill designed to draw a clearer line between open-source builders and custodial crypto businesses.

Why it matters
The proposal arrives amid heightened enforcement targeting decentralized tooling and infrastructure, and follows high-profile prosecutions tied to Tornado Cash that many in the community say risk criminalizing routine open-source work. Backers say the act would update Section 1960 of the U.S. Code — a statute originally aimed at combating money laundering — to limit its application to actors who actually control customer assets or execute transfers on users’ behalf.

What the bill does
Under the legislation led by Reps. Scott Fitzgerald, Ben Cline and Zoe Lofgren, liability for money-transmitter-style offenses would be focused on custodial entities and service providers that handle customer funds or facilitate transfers. Developers who merely write, publish or maintain open-source code would be explicitly excluded from prosecutorial reach, removing a legal gray area that critics argue has chilled innovation.

Lawmakers’ arguments
Rep. Ben Cline framed the change as a necessary correction to federal overreach: “For too long, federal overreach has blurred the line between bad actors and the innovators building next‑generation technology.” Rep. Scott Fitzgerald similarly warned that “innovators and software developers have been caught in the crosshairs of an aggressive regulatory approach.”

Industry reaction
Responses from the crypto policy ecosystem were swift. The Solana Institute thanked the sponsors for “championing developers at this critical junction for open-source software development and the crypto ecosystem.” The Blockchain Association also endorsed the measure, with CEO Summer Mersinger signaling broad industry support for a statutory boundary between non‑custodial developers and custodial financial intermediaries.

Legislative context
The bill’s timing intersects with other high-profile crypto legislation. The Blockchain Regulatory Certainty Act (S.3611), sometimes referenced as BRCA, has been debated in early 2026 after passing the House in July 2025 but remains stalled in negotiations. Advocates warn that stripping developer exemptions from broader bills could revive enforcement pressure. At the same time, the GENIUS Act — which added stablecoin guardrails — deliberately avoided expanding developer liability. The Promoting Innovation in Blockchain Development Act narrows Section 1960 toward custodial actors, and industry groups intensified lobbying across dozens of Senate offices in late February 2026 as BRCA and related measures become pivotal tests for the U.S. crypto regulatory framework.

Bottom line
The new bill seeks to protect open-source developers from being treated as money transmitters simply for publishing or maintaining code, while preserving enforcement tools against custodial actors who control or move customer assets. As Congress weighs multiple overlapping crypto bills, the outcome will shape how the U.S. balances innovation, consumer protection and law enforcement in decentralized finance.

Disclaimer: This article is informational and not investment advice. Trading, buying or selling cryptocurrencies carries high risk; readers should do their own research. © 2026 AMBCrypto

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