CLARITY Act Faces Surveillance, Lobbying Concerns in Senate

The U.S. Senate has returned from recess to debate the Digital Asset Market CLARITY Act, but Alex Thorn, head of research at Galaxy Digital, is warning that the bill may represent the largest expansion of financial surveillance since the USA PATRIOT Act. In a January 2026 client note, Thorn highlighted concerns about "fine print" in the legislation, urging caution despite the industry's long-standing wish for regulatory clarity. Supporters on the Senate Banking Committee argue the bill is designed to "crack down on illicit finance" while protecting software developers and promoting innovation, with the official summary stating it gives law enforcement "new, targeted tools to combat money laundering, terrorist financing, and sanctions evasion."

Thorn's analysis examined sanctions data from the U.S. Treasury's Office of Foreign Assets Control, noting that OFAC has historically sanctioned 518 Bitcoin addresses, which cumulatively received 249,814 $BTC, sent 239,708 $BTC, and currently hold a net balance of approximately 9,306 $BTC worth roughly $707 million. However, Thorn notes the SDN list is just one tool Treasury uses today, whereas the CLARITY Act would expand these powers significantly. Cardano founder Charles Hoskinson has also raised concerns, arguing the legislation's broad provisions could be exploited by future political administrations regardless of party control. Additional concerns include automatic classification of new digital tokens as securities with virtually no pathway to reclassification, as well as "Distributed Ledger Application Layers" that could create compliance obligations forcing DeFi interfaces to monitor users.

Meanwhile, Wall Street giants including JPMorgan Chase & Co. and Citadel LLC are actively lobbying the SEC to ensure tokenized securities do not receive special treatment. In a letter to the SEC, Thorn argued that "forcing a new architecture to clone the old one" is not technology neutrality, suggesting a decentralized automated market maker should not be classified as an exchange because it is "autonomous code" and not an organization of persons operating a marketplace. Thorn warned that banks and brokerages are playing a cynical game where they publicly back Bitcoin but use their Washington lobbyists to delay real integration that would threaten their control over market structure.

Legislative disputes have narrowed to core questions primarily revolving around stablecoin rewards. According to JPMorgan analysts, the tentative compromise would ban passive "idle yield" on stablecoins because banks fear it would drain deposits, while allowing activity-based rewards. However, critics including Ryan Adams argue that if banks succeed in killing yield provisions, it proves the Senate is prioritizing bank interests over the public. Reports indicate negotiators are close to a deal on stablecoin yields, though other hurdles remain. Thorn has warned that if the CLARITY Act does not pass committee by the end of April 2026, the odds of passage this year become "extremely low."