The Future of Digital Assets is in Danger with the New Crypto Law.

Galaxy Research stated that the new cryptocurrency bill in the U.S. Senate could grant extraordinary powers to the government over digital assets, potentially representing the most comprehensive expansion of financial surveillance since the Patriot Act. While the bill is thought to provide a clear framework for the crypto market, many experts in the sector are raising concerns about the potential risks that come with the legislation.

Among the positive aspects of the bill are provisions for the protection of individuals’ self-custody rights, the non-targeting of developers, and the reduction of jurisdictional confusion among regulatory bodies. However, according to Galaxy Research, the most controversial part of the bill stems from the new powers granted to the Treasury Department regarding illegal finance and sanctions.

Alex Thorn, Head of Galaxy Research, expressed that the draft shared in the Senate Banking Committee goes much further compared to the Clarity Act that passed in the House of Representatives. According to Thorn, the issue is that many of these new powers can be implemented quickly and without the need for a court order. The draft grants the U.S. Treasury Department the authority to temporarily halt digital asset transactions identified as high risk. This allows for funds to be frozen very quickly in the event of encountering a suspicious transaction or platform.

Additionally, the goal is to extend sanctions and anti-money laundering legislation not only to centralized exchanges but also to certain interfaces of DeFi applications. Moreover, protocols evaluated as 'not fully decentralized' could fall under the scope of the Bank Secrecy Act. This approach could have negative consequences for many decentralized structures.

Galaxy Research emphasizes that comparing the new cryptocurrency bill to the Patriot Act shows that the surveillance powers over digital assets being explicitly and broadly codified into law increases the risk of not only combating crime but also placing ordinary users and developers under stricter oversight. This uncertainty has led to significant backlash within the industry.

The draft is set to be voted on Thursday in the Senate Banking Committee, marking a critical juncture for the future of the crypto sector. Investors should closely monitor these developments and be aware of potential risks.