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Hassan Shittu
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A draft crypto market structure bill in the U.S. Senate is drawing renewed concern from the digital asset industry, with Galaxy Digital warning it could give the Treasury Department sweeping surveillance and enforcement authority reminiscent of the USA Patriot Act.
The warning comes as lawmakers move to bridge House and Senate regulatory proposals amid ongoing market volatility and policy uncertainty.
Senate Crypto Bill Gives Treasury Broad New Powers, Galaxy Says
In a research note published Tuesday, Galaxy said the Senate Banking Committee’s draft goes well beyond the House-passed Digital Asset Market Clarity Act, particularly in its treatment of illicit finance.
At the center of the firm’s concern is a new crypto-specific “special measures” authority that would allow Treasury to label foreign jurisdictions, financial institutions, or even entire categories of digital asset transactions as primary money-laundering concerns.
Once designated, Treasury could restrict or condition crypto fund transfers connected to those entities, a power Galaxy compared directly to authorities created under the Patriot Act after the September 11 attacks.
Galaxy argued that, while framed as a national security tool, the authority could be applied broadly across offshore trading venues and transaction rails, materially expanding the government’s reach into crypto markets.
It said that, taken together, the bill’s provisions would amount to the largest expansion of financial surveillance powers since the early 2000s, a period that remains controversial for its impact on civil liberties.
The draft legislation also introduces a formal framework for temporary transaction holds.
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 the option to extend, without first obtaining a court order.
Galaxy flagged this as a significant departure from existing processes, noting the absence of immediate judicial oversight.
Another section of the bill explicitly brings crypto front ends into sanctions and Anti-Money Laundering compliance.
The text defines “distributed ledger application layers,” including web-hosted interfaces used to access blockchains and decentralized finance protocols.
It also directs Treasury to issue guidance requiring these tools to screen wallets, block sanctioned activity, and apply risk-based AML controls.
Stablecoin Rewards Face New Limits as Senate Crypto Debate Intensifies
Galaxy also pointed to language targeting so-called “DeFi in name only” protocols, which would allow regulators to impose Bank Secrecy Act obligations on teams or individuals who retain meaningful control over protocol functionality or user access.
The Senate proposal is moving forward alongside intense debate over stablecoin rewards.
A revised draft released ahead of the markup would prohibit digital asset service providers from paying yield simply for holding payment stablecoin balances.
Banking groups have backed the restriction, arguing that yield-bearing stablecoins resemble deposits without equivalent safeguards, while crypto firms say the issue was already settled under the GENIUS Act passed last year.
Industry responses have been mixed, with the Crypto Council for Innovation saying it views the Senate text as evidence of continued engagement on a critical policy priority but stressing that any final framework must preserve consumer choice and support competition.
Coinbase has warned it could withdraw support if reward programs are curtailed too aggressively, even as some executives signal a willingness to accept the current compromise.
The legislative path remains uncertain as the Senate Banking Committee is preparing for markup this week, while the Senate Agriculture Committee plans to release its own text by January 21, with a markup scheduled for January 27.
Both versions would need to be reconciled before a full Senate vote, followed by negotiations with the House.
