Crypto leaders warn CLARITY Act expands Treasury powers

Crypto industry leaders and researchers raised objections to the Senate’s Digital Asset Market CLARITY Act, saying the bill would expand Treasury authority, automatically classify most new tokens as securities and create compliance duties for decentralized finance platforms.

Alex Thorn, head of research at Galaxy Digital, flagged the bill in a January 2026 client note and on social media. He highlighted historical sanctions activity by the Treasury’s Office of Foreign Assets Control (OFAC), noting OFAC has sanctioned 518 Bitcoin addresses that together received about 249,814 BTC, sent roughly 239,708 BTC and now hold a net balance around 9,306 BTC, about $707 million at current prices.

Thorn wrote that the CLARITY Act would add tools beyond the existing Specially Designated Nationals list, giving Treasury broader powers to intercept alleged illicit assets. He warned in March that if the bill did not pass committee by the end of April 2026, chances of passage this year would fall “extremely low.”

Senators resumed debate after a recess and negotiators have reported progress on stablecoin yield rules. Supporters on the Senate Banking Committee describe the bill as aimed at cracking down on illicit finance and protecting developers. The bill’s summary says it would give law enforcement “new, targeted tools to combat money laundering, terrorist financing, and sanctions evasion.”

Opponents say other provisions go farther. The draft would typically treat new digital tokens as securities with limited paths to reclassification, a feature critics say could restrict market entry. The bill also introduces a category called “Distributed Ledger Application Layers,” which could impose compliance obligations on software that runs on blockchains and potentially require DeFi interfaces to collect or monitor user information.

Cardano founder Charles Hoskinson cautioned that broad statutory language could be used by future administrations regardless of party. An independent review of an earlier draft noted the bill includes a “Keep Your Coins Act” to protect self-custody but also contains exceptions that permit government intervention when officials allege illicit finance.

Industry debate has also focused on automated market makers and market structure. Thorn argued that AMMs operate as autonomous code and should not be treated the same as centralized exchanges run by organizations. He characterized liquidity providers on AMMs as individual traders using personal balances rather than dealers serving customers, and wrote that regulators should avoid “forcing a new architecture to clone the old one.”

Banks and trading firms including JPMorgan Chase and Citadel have lobbied on token rules, and a central negotiation point in the Senate has been stablecoin yields. A prospective compromise would ban passive idle yield on stablecoin holdings while allowing activity-based rewards. Investor Ryan Adams criticized proposals to limit yield, saying such rules would favor banks over retail consumers.

With committee deadlines approaching, negotiators are working on technical and policy questions. Industry participants are monitoring whether the final bill will narrow enforcement tools or broaden Treasury authority in ways that would affect DeFi and token markets.