Galaxy Research warned Tuesday that a Senate Banking Committee draft would give the Treasury broad new powers to freeze digital asset transactions and regulate decentralized finance frontends to curb illicit finance. The draft would expand “special measure” authority and create a statutory framework for temporary transaction holds without court orders.
Alex Thorn of Galaxy Digital said the proposal “includes substantially enhanced financial surveillance authorities to combat illicit finance than the House’s CLARITY Act.” He added it would “represent the single largest expansion to financial surveillance authorities since the USA PATRIOT Act,” citing the post-9/11 legislative package. (Ed. note: Galaxy framed the change as historically large.)
The draft would also create a formal “temporary hold” power and a statutory safe harbor for firms that comply in good faith. The note calls this tool “a transaction-interruption lever designed to allow for streamlining of law enforcement requests along with a liability shield.”
The bill text reportedly introduces the concept of a “distributed ledger application layer” and directs Treasury to clarify sanctions and AML duties for frontends operating in the United States. Horizen Labs CEO Rob Viglione warned that companies need both confidentiality and auditability, saying, “Enterprises and institutions need confidentiality around sensitive business activity, while regulators need auditability.”
Industry leaders also flagged unresolved practical gaps for payments and payroll. Franklin CEO Megan Knab noted stablecoins are “formally treated as money at the federal level,” yet said “at least eight U.S. states continue to prohibit their use in wage payment.”
