Three U.S. lawmakers on February 26 introduced the Blockchain Development and Innovation Act of 2026, a bipartisan effort aimed at protecting Bitcoin developers from interpretations of the law that treat them as money transmitters.
This proposal aims to modify the application of Section 1960 of the Penal Code, which was recently used by the Department of Justice. Prosecute privacy tool creators and open source protocols.
The bill was introduced by Representatives Scott Fitzgerald, Ben Kline, and Zoe Lofgren. The central objective is to establish a clear distinction. Remittance regulations should only apply to those actors who actually control their customers’ digital assets.
The project seeks to stop what the industry calls “regulation by execution” by eliminating people who only write code without managing external capital. This phenomenon has affected projects related to privacy and decentralized finance (DeFi), such as the cases of Tornado Cash and Samourai Wallet.
Rep. Klein emphasized the need for this measure to maintain the country’s technological competitiveness. “For too long,” his statement said, excessive federal powers have “blurred the lines between bad actors and innovators building next-generation technologies.”
Fitzgerald suggested as much, questioning why software innovators and developers have long been targeted by regulators. He agrees with Mr. Lofgren, who explained that he is currently looking at how the current law is being misapplied. It stifles innovation and drives developers out of the country.
This is not the only legislative effort in this direction. As reported by CriptoNoticias, on January 13th, Senators Cynthia Lummis and Ron Wyden introduced the Blockchain Regulatory Certainty Act.
The proposal also emphasizes that infrastructure providers and software developers who cannot manage users’ funds should not be classified as money transmitters. In that sense, Sen. Lummis emphasizes that it’s time to stop treating software developers like banks just because they write code.
The urgency for these laws comes after high-profile court cases such as Tornado Cash and Samurai Wallet, where the main developers were jailed. In both cases, the authorities applied Section 1960 even though the programmers had no control over the users’ digital currencies.
A lack of clear rules will cause U.S. participation in open source software development to drop from 25% in 2021 to 18% in 2025, as innovators migrate to countries with greater legal certainty, according to data from the DeFi Education Fund (DEF).