Galaxy Digital is warning that a draft U.S. Senate crypto market-structure bill could materially expand the Treasury Department’s surveillance and enforcement reach, drawing an explicit comparison to the step-change in authority associated with the USA PATRIOT Act era. With a Senate Banking Committee markup scheduled for Jan. 15, 2026, the proposal has become a near-term flashpoint for the digital-asset industry.
At the center of the debate is whether traditional financial-control tooling should be extended into DeFi rails and stablecoin plumbing. Critics argue the draft could enable transaction intervention and broader AML designations without the same level of up-front judicial oversight that market participants typically expect.
Temporary holds and expanded Treasury “special measures”
One of the most consequential concepts described is a “temporary hold” authority that would let law-enforcement requests trigger freezes at stablecoin issuers and other digital-asset service providers for up to 30 days, with a pathway to extend. Galaxy characterizes this as a “transaction-interruption lever” that could accelerate enforcement while creating de facto pressure to comply via liability protections.
The draft also expands Treasury’s “special measures” toolkit by widening the scope for designating jurisdictions, institutions, or categories of digital-asset transactions as primary money-laundering concerns. Galaxy’s concern is that broader designation authority could be applied across offshore venues and transaction corridors, restricting fund flows through policy action rather than case-by-case adjudication.
DeFi front ends and “meaningful control” under BSA-style obligations
For DeFi specifically, the draft introduces a definition of “distributed ledger application layers,” described as web-hosted interfaces that connect users to protocols. The bill would direct Treasury to require these interfaces to screen wallets, block sanctioned activity, and implement risk-based AML controls, effectively moving compliance to the front end.
Another pressure point is the potential extension of Bank Secrecy Act-style obligations to individuals or groups deemed to have “meaningful control” over a protocol’s functionality or access. If that standard is applied broadly, it narrows the operational distance between decentralized software maintenance and regulated financial-services compliance.
Alex Thorn, Galaxy’s head of firmwide research, framed the stakes in maximal terms, calling it “the single largest expansion to financial surveillance authorities since the USA PATRIOT Act.” Opponents contend this approach could chill product development, reduce user privacy, and undermine DeFi’s permissionless operating model by introducing monitoring and intervention capacity at key access points.
Supporters of tighter rules position the draft as an AML gap-closure effort; critics counter that imposing compliance duties on non-custodial interfaces and protocol stewards could redirect activity to less-regulated channels and concentrate advantage with intermediaries. The liability protections for compliant entities are viewed as a market-structure nudge that could favor permissioned rails over open access.