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Weekly Crypto Regulation Roundup: Political Pressure, Market Structure Delays, and a Surveillance Flashpoint

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The previous week in crypto regulation uncovered a deeper fact concerning the present coverage atmosphere: digital asset oversight is not simply a technical debate about market construction however a proxy battleground for institutional independence, surveillance energy and political leverage.

From a rare intervention by the Federal Reserve chair to mounting fractures in Congress over crypto laws, the regulatory image stays risky—and more and more politicized.

Powell Breaks Silence on DOJ Probe, Warns of Threat to Fed Independence

Federal Reserve Chair Jerome Powell delivered probably the most consequential public statements of his tenure on Sunday, accusing the Trump administration of weaponizing the Justice Department to stress the central financial institution into reducing rates of interest.

Powell confirmed that the Department of Justice served the Fed with grand jury subpoenas on Friday, tied to his June 2025 congressional testimony regarding a multi-year renovation of the Federal Reserve’s headquarters. While the investigation facilities on disclosures associated to the undertaking, Powell framed the motion in far broader phrases.

“The risk of legal prices is a consequence of the Federal Reserve setting rates of interest primarily based on our greatest evaluation of what’s going to serve the general public, somewhat than following the preferences of the President,” he stated in a uncommon televised tackle.

The implications lengthen past financial coverage. Powell warned that permitting legal investigations to affect price choices dangers subordinating financial judgment to political intimidation. For crypto markets—already delicate to macro volatility—the episode underscores how regulatory stability relies upon not solely on statutes, however on the resilience of institutional norms.

Tennessee Judge Halts State Action Against Kalshi

In a notable test on state-level enforcement, a federal judge in Tennessee temporarily blocked regulators from taking motion in opposition to prediction market platform Kalshi.

U.S. District Judge Aleta Trauger granted Kalshi a preliminary injunction and short-term restraining order in opposition to the Tennessee Sports Wagering Council and the state legal professional normal. The order pauses enforcement of a cease-and-desist directive whereas the case proceeds.

Judge Trauger discovered that Kalshi would undergo “irreparable damage and loss” if state motion continued and stated the corporate is prone to succeed on the deserves of its claims. Crucially, she added that Kalshi’s rights would possible be violated absent courtroom intervention.

The ruling reinforces a rising judicial skepticism towards state makes an attempt to manage federally overseen monetary merchandise—a dynamic that might have broader implications for derivatives-linked crypto merchandise and on-chain prediction markets.

Senate Delays Market Structure Bill as Bipartisan Fault Lines Emerge

Momentum behind complete crypto laws slowed once more after Senate Agriculture Committee Chairman John Boozman postponed a planned markup of the Digital Asset Market Clarity Act to late January.

The delay follows negotiations with Democratic lead Cory Booker, as lawmakers try to finalize unresolved provisions masking regulatory jurisdiction, stablecoin yields, DeFi protections, and token classification. While the invoice seeks to separate oversight between the SEC and CFTC, political timing is changing into a rising impediment.

With the 2026 midterm elections approaching, some analysts now warn that remaining passage may slip into 2027. That danger persists regardless of vocal assist from the Trump administration and newly appointed SEC Chair Paul Atkins, who described this era as “a large week for crypto” and urged Congress to maneuver digital asset markets out of the regulatory grey zone.

New Timeline, Old Tensions

Boozman later confirmed that legislative textual content could be launched by the shut of enterprise on January 21, with a committee markup scheduled for January 27 at 3 p.m. The announcement adopted parallel motion by the Senate Banking Committee, the place senators reportedly submitted 137 amendments to the CLARITY Act forward of their very own markup.

“This schedule ensures transparency and permits for thorough overview,” Boozman stated, thanking Booker for continued bipartisan cooperation.

Yet the quantity of amendments highlights how unsettled core coverage questions stay—significantly round enforcement authority, surveillance, and the therapy of decentralized methods.

Galaxy Warns of “Patriot Act–Style” Crypto Surveillance

Those considerations got here into sharper focus after Galaxy Digital revealed a analysis be aware warning that the Senate Banking Committee’s draft invoice may grant the Treasury Department sweeping new powers harking back to the USA Patriot Act.

According to Galaxy, the draft goes past the House-passed Digital Asset Market Clarity Act, significantly in its strategy to illicit finance. At situation is a proposed crypto-specific “particular measures” authority that may enable Treasury to designate overseas jurisdictions, monetary establishments and even complete classes of digital asset transactions as major money-laundering considerations.

Such authority, Galaxy argued, dangers creating blunt enforcement instruments that might chill respectable exercise, fragment liquidity, and push innovation offshore—outcomes regulators have repeatedly stated they need to keep away from.

Coinbase Withdraws Support, Senate Banking Delays Markup

Industry unease boiled over when Coinbase publicly withdrew assist for the Senate Banking Committee’s draft, prompting Chairman Tim Scott to postpone the committee’s deliberate markup.

CEO Brian Armstrong stated the alternate couldn’t again the invoice after reviewing the textual content over 48 hours, regardless of its purpose of clarifying token classifications and assigning spot market oversight to the CFTC.

The reversal uncovered a widening hole between lawmakers in search of expansive enforcement authority and business gamers demanding predictable, proportionate guidelines. It additionally underscored a broader actuality: with out business buy-in, even bipartisan laws dangers stalling.

New York Pushes Criminalization of Unlicensed Crypto Activity

At the state degree, enforcement rhetoric intensified additional. Alvin Bragg, talking at New York Law School, urged lawmakers to criminalize unlicensed crypto operations, citing what he described as a “$51 billion legal economic system.”

Bragg argued that regulatory gaps enable illicit proceeds from weapons, medication, fraud, and terrorism financing to movement by way of unlicensed platforms with restricted consequence. Closing these gaps, he stated, is now a core enforcement precedence alongside gun violence and organized retail theft.

While New York has lengthy taken an aggressive stance by way of its licensing regime, Bragg’s feedback sign renewed urge for food for legal penalties—not simply civil enforcement—in crypto oversight.

The Bigger Picture

Taken collectively, this week’s developments illustrate a regulatory atmosphere below pressure. Federal independence, state authority, congressional compromise and civil liberties are all colliding within the crypto debate. Markets are not reacting solely to coverage outcomes however to the political processes behind them.

For digital asset companies and buyers, the message is evident: regulatory danger is more and more intertwined with political danger. Until lawmakers resolve not simply who regulates crypto—however how a lot energy regulators ought to wield—the business will stay in a state of cautious uncertainty.

The publish Weekly Crypto Regulation Roundup: Political Pressure, Market Structure Delays, and a Surveillance Flashpoint appeared first on Cryptonews.

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