The Major Cities Chiefs Association has endorsed the latest version of the Digital Asset Market Clarity Act, citing provisions that would improve coordination between law enforcement, financial institutions, and digital-asset providers.
The endorsement matters because it identifies a practical weakness in the current response to digital-asset crime. Different organizations may hold useful information about the same fraud network, wallet address, account, or transaction, but there is no consistent way to determine who has relevant information or exchange it quickly.
The updated CLARITY Act attempts to address that problem by creating formal public-private information-sharing channels and giving state and local law enforcement a larger role.
What did the Major Cities Chiefs Association say about the CLARITY Act?
On July 29, 2026, the Major Cities Chiefs Association, which represents police executives from large cities in the United States and Canada, endorsed the latest version of H.R. 3633 as it advances through the Senate.
The organization said its subject-matter experts reviewed multiple versions of the legislation and that recent revisions addressed concerns raised by the law enforcement community.
The MCCA endorsement letter specifically pointed to the addition of state and local law enforcement agencies to Sections 10203, 10204, and 10309.
According to the letter, the updated bill would:
- Formalize information sharing with financial institutions and digital-asset providers
- Strengthen anti-money laundering and suspicious activity reporting requirements
- Establish a federal working group focused on the illicit use of digital assets
- Study the use of cryptocurrency mixers
- Improve the ability to temporarily freeze suspicious transactions
- Strengthen fraud-prevention requirements for cryptocurrency kiosks
The association called these revisions meaningful progress toward improving digital-asset financial-crime investigations.
Why does state and local law enforcement participation matter?
Digital-asset investigations are not handled exclusively by federal agencies.
A victim may report an investment scam to a local police department. A state agency may be investigating related money mule accounts. A federal agency may be tracking the broader criminal organization. A bank or cryptocurrency exchange may hold the customer, account, and transaction information needed to move the investigation forward.
Each organization can have a legitimate piece of the case without knowing what the others possess.
The updated legislation recognizes this operational reality. Section 10203 would allow the Treasury Department, in consultation with FinCEN, to designate federal, state, and local law enforcement agencies for participation in a proposed information-sharing pilot. State attorneys general could also be included. The proposed statutory language places these agencies alongside Treasury, FinCEN, the IRS, OFAC, and the Department of Homeland Security.
State and local participation is important because those agencies often receive the first complaint, interview the victim, obtain the initial financial records, and identify the first wallet address, phone number, email address, username, or account connected to a fraud scheme.
Leaving them outside the information-sharing process would leave valuable investigative information isolated.
What would Section 10203 establish?
Section 10203, the Preventing Illicit Finance Through Partnership Act, would establish a five-year pilot program for secure information sharing about potential illicit-finance violations, threats, and emerging risks.
The initial private-sector participants would include 10 volunteer money services businesses, 10 volunteer digital commodity brokers, dealers, or exchanges, and 10 volunteer banks. The legislation would also allow other appropriate entities and qualifying information-sharing networks to participate.
Information could be exchanged through:
- A Treasury portal or similar approved mechanism
- Secure email
- Monthly meetings facilitated by Treasury
- A certified or recognized information-sharing or interdiction network
The bill describes such a network as a secure, real-time public-private mechanism that supports the detection, prevention, and interdiction of illicit finance through rapid information exchange.
This is more than a policy discussion about cooperation. It is an attempt to define an operating structure for cooperation.
Deconflict previously published a detailed analysis of how the Section 10203 pilot would work.
Information sharing is not the same as unrestricted data sharing
A formal information-sharing program does not mean every participant should receive complete case files, customer records, or sensitive investigative material.
Information should be limited to what the recipient is authorized to receive and needs for a legitimate financial-crime purpose. Organizations will still need controls for privacy, access, retention, documentation, and legal process.
The harder operational questions include:
- How is the identity and authority of each participant verified?
- What information can legally be shared?
- How is the source of an investigative signal recorded?
- How does a financial institution connect that signal to the correct customer, account, or transaction?
- How is sensitive intelligence protected from unauthorized access?
- How does an organization document what it received and what action it took?
- How are false matches, outdated information, and conflicting records handled?
The value of public-private coordination depends on the quality, provenance, and permitted use of the information being exchanged.
A financial institution should not treat an investigative signal as a final legal conclusion. It should use the information as additional context within its existing fraud, AML, sanctions, investigation, and legal processes.
What Section 10204 would add
Section 10204 would establish an Independent Financial Technology Working Group to Combat Terrorism and Illicit Finance.
The proposed working group would bring together federal officials and private-sector representatives to study the illicit use of digital assets and recommend ways to improve anti-money laundering and counter-illicit-finance efforts.
The updated language also includes representation from state or local law enforcement agencies.
That inclusion matters. Policies written without the agencies handling day-to-day victim reports and financial-crime investigations can miss basic operational constraints, including staffing, training, technical access, jurisdiction, and the speed at which digital assets can move.
State and local agencies need a voice in how these programs are designed, not simply instructions after the programs have been created.
Why financial institutions should pay attention now
The updated CLARITY Act remains proposed legislation. Financial institutions should not treat its information-sharing provisions as current legal requirements or rebuild their compliance programs around language that may still change.
They can, however, assess whether their current systems are ready for more structured coordination with law enforcement.
Compliance and financial-crime leaders should consider whether their organizations can:
- Verify the identity and authority of a law enforcement contact.
- Receive investigative information through a controlled channel.
- Connect an external signal to the correct customer, account, wallet, transaction, or alert.
- Preserve the source and history of the information.
- Limit access to authorized personnel.
- Coordinate a response across fraud, AML, sanctions, legal, and investigations teams.
- Distinguish investigative context from a final determination.
- Document how the information influenced an escalation, restriction, SAR review, or other decision.
These capabilities are useful whether or not the CLARITY Act becomes law in its current form.
Where Deconflict fits
Deconflict helps participating law enforcement agencies determine whether investigative identifiers have appeared in other cases and connect with the appropriate investigator. Financial institutions can use Deconflict’s institutional capabilities to receive additional verified investigative context within controlled financial-crime workflows.
Deconflict does not replace blockchain analytics, transaction monitoring, customer due diligence, or an institution’s independent decision-making. It provides a different source of information: verified context connected to participating law enforcement intelligence.
The MCCA endorsement reflects broader recognition of the underlying problem. The organizations fighting financial crime need a secure way to determine when their information overlaps and coordinate before the opportunity to act is lost.
What organizations should take away
The most important part of the MCCA’s endorsement is not its position on every provision of the CLARITY Act.
It is the reason the organization gave for supporting the revisions.
State and local law enforcement must be included. Information sharing with financial institutions and digital-asset providers must become more structured. The people designing policy must account for how investigations actually begin and how quickly relevant financial information can become outdated.
Regulation can establish responsibilities and authorities. Effective enforcement still depends on whether the right organization receives the right information in time to use it.
Frequently Asked Questions
Why did the Major Cities Chiefs Association endorse the latest version?
The MCCA said recent revisions addressed law enforcement concerns and added provisions that would improve investigative capabilities, public-private coordination, industry accountability, and victim protection.
Would state and local law enforcement participate in the information-sharing pilot?
Yes. Under the current proposal, the Treasury could designate federal, state, or local law enforcement agencies and state attorneys general to participate.
What organizations would initially participate from the private sector?
The initial group would consist of 10 volunteer banks, 10 volunteer money services businesses, and 10 volunteer digital commodity brokers, dealers, or exchanges.
Would the CLARITY Act require unrestricted access to law enforcement case files?
No. The proposal would establish secure information-sharing mechanisms, but information would still need to be shared subject to applicable legal authority, program rules, privacy protections, and permitted uses.
Does information from law enforcement automatically prove that a customer or wallet is involved in criminal activity?
No. Information from law enforcement does not automatically prove that a customer or wallet is involved in criminal activity. It is an investigative signal that provides additional context. Financial institutions may contact the reporting investigator through the Deconflict Nexus portal or other approved channels for clarification.
About Deconflict
Deconflict provides Verified Intelligence for Financial Crime. The platform helps participating law enforcement agencies and financial institutions find relevant investigative connections, verify context, and coordinate through controlled workflows. Access is free for verified law enforcement.
