Galaxy Digital has raised concerns that a draft crypto market structure bill released by the US Senate Banking Committee would grant the Treasury Department unprecedented surveillance and enforcement authority, calling it the largest expansion of financial oversight since the Patriot Act.
In a research note published Tuesday, Galaxy said the Senate proposal significantly exceeds the House-passed CLARITY Act, particularly in its measures targeting illicit finance. Central to Galaxy’s warning is a new crypto-specific “special measures” authority, which would allow the Treasury to designate foreign jurisdictions, financial institutions, or entire categories of digital asset transactions as primary money-laundering risks. This designation could enable the agency to restrict or condition certain crypto fund transfers, a tool Galaxy likens to powers granted under the Patriot Act, but potentially applied broadly across offshore venues and transaction networks.
For context, the Patriot Act, enacted after the September 11 attacks, expanded government surveillance capabilities to combat terrorism, including enhanced wiretapping and digital communications tracking. The law has been controversial due to civil liberties concerns.
Transaction freeze powers and AML requirements
The draft Senate bill also introduces a formal “temporary hold” mechanism for digital asset transactions. Under this framework, Treasury or other designated agencies could require stablecoin issuers and digital asset service providers to freeze transactions for up to 30 days, with potential extensions, without needing a court order.
Additionally, the legislation explicitly brings crypto front ends under sanctions and Anti-Money Laundering (AML) obligations. It defines “distributed ledger application layers,” including web interfaces used to access blockchains or DeFi protocols, and directs Treasury to issue guidance requiring these platforms to screen wallets, block sanctioned activity, and implement risk-based AML controls.
Galaxy flags DeFi provisions in Senate crypto bill
Galaxy Digital also highlighted language in the draft bill targeting so-called “DeFi in name only” protocols. Under this provision, regulators could impose Bank Secrecy Act obligations on individuals or groups who retain meaningful control over a DeFi protocol’s functionality or user access.
“On balance, were the powers outlined in the SBC draft to become law, we believe they would represent the single largest expansion to financial surveillance authorities since the USA PATRIOT Act,” Galaxy wrote.
Crypto Council welcomes progress, urges careful review
In contrast, the Crypto Council for Innovation (CCI) described the Senate Banking Committee’s updated crypto market structure draft as a sign of “continued engagement on one of the most consequential policy priorities facing digital assets today,” according to a note shared with Cointelegraph.
CCI said it is carefully reviewing the draft while engaging with members and policymakers, emphasizing that any final framework should protect consumer choice and promote responsible competition.
The bill’s legislative progress has also slowed. On Monday, the US Senate Agriculture Committee postponed its markup of the crypto market structure legislation to the final week of January, with Chairman John Boozman citing the need for additional time to secure broad bipartisan support.
