Galaxy Digital has warned that a draft crypto market structure bill released by the US Senate Banking Committee would hand the Treasury Department sweeping new surveillance and enforcement tools, describing it as the largest expansion of financial oversight authority since the US Patriot Act.
In a research note published Tuesday, Galaxy said the Senate proposal goes far beyond the House-passed CLARITY Act, particularly on illicit finance provisions. At the center of Galaxy’s warning is a new crypto-specific “special measures” authority.
The authority would allow the Treasury to designate foreign jurisdictions, financial institutions or entire classes of digital asset transactions as primary money-laundering concerns, giving it the power to restrict or condition certain crypto fund transfers. Galaxy compared this to tools created under the Patriot Act, noting that it could be applied broadly across offshore venues and transaction rails.
The Patriot Act is a law passed after the 9/11 attacks to enhance national security by expanding government surveillance powers, giving law enforcement new tools, like easier wiretapping and tracking digital communications, to combat terrorism. The regulation has faced significant controversy over civil liberties.
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Senate crypto bill adds transaction freeze powers
The draft crypto market structure bill also introduces a formal “temporary hold” framework for digital asset transactions. Under this mechanism, Treasury or other covered agencies could request that stablecoin issuers and digital asset service providers freeze transactions for up to 30 days, with possible extensions, without first obtaining a court order.
Another key provision explicitly pulls crypto front ends into sanctions and Anti-Money Laundering compliance. The bill defines “distributed ledger application layers,” such as web-hosted interfaces used to interact with blockchains or decentralized finance (DeFi) protocols, and directs Treasury to issue guidance requiring these tools to screen wallets, block sanctioned activity, and apply risk-based AML controls.
Galaxy also noted language targeting so-called “DeFi in name only” protocols. Under this provision, regulators could impose Bank Secrecy Act obligations on individuals or groups that retain meaningful control over a DeFi protocol’s functionality or 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.
Related: Banks’ stablecoin concerns are ‘unsubstantiated myths‘: Professor
Crypto Council welcomes progress on market structure bill
Meanwhile, in a note shared with Cointelegraph, the Crypto Council for Innovation (CCI) said the Senate Banking Committee’s updated crypto market structure text shows “continued engagement on one of the most consequential policy priorities facing digital assets today.”
CCI said it is closely reviewing the draft and engaging with members and policymakers, stressing that any final framework should preserve consumer choice and support responsible competition.
On Monday, the US Senate Agriculture Committee delayed its markup of the crypto market structure bill until the final week of January, with Chairman John Boozman citing the need for more time to secure broad bipartisan support.
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