The U.S. Senate Banking Committee’s draft for a new crypto market structure bill has ignited a firestorm within the digital asset industry.
Galaxy Digital warns that the proposal would grant the Treasury Department the most significant expansion of financial surveillance authority since the 2001 USA Patriot Act.
Released earlier this week by Chairman Tim Scott (R-S.C.), the 278-page text aims to establish a comprehensive regulatory framework for digital assets.
However, analysts argue that the inclusion of aggressive illicit finance provisions could fundamentally alter the privacy landscape for American users and decentralized protocols.
Patriot Act 2.0 for Digital Assets?
At the heart of the controversy is a "special measures" authority that would allow the Treasury to designate specific crypto transactions or jurisdictions as money-laundering concerns.
Unlike traditional banking rules, this framework would enable the government to freeze digital asset transfers for up to 30 days without first obtaining a court order.
Galaxy Digital’s research head, Alex Thorn, noted that these powers extend far beyond existing House-passed legislation.
The bill also targets "distributed ledger application layers," effectively requiring web-based DeFi interfaces to screen wallets and block sanctioned activity as if they were traditional financial institutions.
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The Battle for Bipartisan Consensus
While the Senate Banking Committee plans to mark up the bill on January 15, the Senate Agriculture Committee has delayed its own session until the end of the month.
Chairman John Boozman (R-Ark.) cited the need for additional time to secure broad bipartisan support, as Democrats push for even stricter ethics and consumer protection clauses.
The Crypto Council for Innovation stated it is reviewing the draft to ensure the final law supports "responsible competition."
However, with provisions that could impose Bank Secrecy Act obligations on DeFi developers, the industry remains wary of a legislative "Trojan Horse" that could stifle innovation.
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