Galaxy Compares Crypto Bill DeFi Rules to Patriot Act Powers

• Galaxy Digital warns Senate crypto bill grants Treasury expanded surveillance powers.
• Legislation allows transaction pauses without court orders upon police requests.
• Senate Banking Committee schedules markup for January 15 with bipartisan debate.

Galaxy Digital Research has issued an alert regarding proposed Senate cryptocurrency legislation, characterizing Treasury Department surveillance provisions as comparable to the USA PATRIOT Act of 2001. Alex Thorn, head of company-wide research at Galaxy Digital, stated the draft under Senate Banking Committee review would constitute “the single largest expansion of financial surveillance powers since the USA PATRIOT Act.”

The analysis has generated discussion among lawmakers, industry participants, and regulatory advocates as legislative negotiations continue over the market structure bill. The research identifies three provisions granting the U.S. Treasury Department authority over digital asset transactions that raise concerns about judicial oversight.

Provisions Expand Government Transaction Control

The draft establishes “temporary hold” authority that enables the Treasury to pause digital asset transactions upon police requests, with a legal safe harbor for compliant companies. This bypasses traditional judicial oversight requirements governing similar actions in conventional banking systems.

The bill extends “special measure” powers targeting digital currencies and decentralized finance platforms. This creates mechanisms for transaction freezes without court orders. This authority was previously unavailable under existing financial surveillance frameworks.

Distributed ledger application layer regulation explicitly establishes mandatory Treasury clarification of sanctions and anti-money laundering obligations for interfaces operating within the United States. This provision extends surveillance requirements to non-custodial protocols.

Thorn’s comparison to the PATRIOT Act carries weight, given that the 2001 legislation substantially widened federal surveillance capabilities following the September 11 attacks. Galaxy contends the proposed crypto bill exceeds those post-9/11 measures by applying surveillance mechanisms to emerging financial infrastructure without corresponding privacy protections or judicial oversight.

Senators Weigh Surveillance Powers and Crypto Innovation

Senator Tim Scott chairs the Senate Banking Committee and drives the bill forward as the primary architect. Committee markup is scheduled for January 15, 2026. Scott announced plans for a January 15 vote, with passage requiring 60 Senate votes, necessitating support from 7-10 Democratic senators, given the current 53-47 Republican majority.

Senator Elizabeth Warren has stood up as the leading Democratic voice expressing concerns about DeFi surveillance and Trump administration officials’ personal financial interests in cryptocurrency. Warren requested investigations into decentralized exchanges like Uniswap and PancakeSwap and questioned whether the Trump administration appropriately addresses national security risks.

Senators Jack Reed, Tina Smith, and Chris Van Hollen expressed concerns, requesting hearings before Thursday’s markup to discuss implications. Senators Cynthia Lummis and Ron Wyden introduced standalone legislation, the Blockchain Regulatory Certainty Act, establishing federal standards protecting non-custodial developers from money transmitter regulations.

Lummis emphasized that “writing code is not the same as controlling money.” She also added that developers maintaining open-source infrastructure should not face prosecution for activities that do not constitute money laundering risks.

Related: Senate Crypto Bill Classifies Network Tokens as Commodities Like BTC