Crypto Regulation Weekly Update: Political Influence, Market Structure Hold-ups, and a Monitoring Controversy

The previous week in cryptocurrency regulation revealed a more profound reality about the existing policy landscape: oversight of digital assets has evolved from a technical discussion about market frameworks to a proxy conflict regarding institutional autonomy, surveillance authority, and political influence.

From a remarkable intervention by the Federal Reserve chair to growing divisions in Congress regarding cryptocurrency legislation, the regulatory landscape remains unstable—and increasingly influenced by politics.

Powell Addresses DOJ Investigation, Cautions Against Threats to Fed Independence

Federal Reserve Chair Jerome Powell made one of the most significant public remarks of his term on Sunday, accusing the Trump administration of using the Justice Department to coerce the central bank into lowering interest rates.

Powell acknowledged that the Department of Justice issued grand jury subpoenas to the Fed on Friday, related to his June 2025 congressional testimony about a multi-year renovation of the Federal Reserve’s headquarters. Although the investigation focuses on disclosures tied to the project, Powell presented the issue in much broader terms.

Fed Chair Powell claims Trump administration is employing criminal threats to pressure rate cuts following DOJ grand jury subpoenas regarding renovation testimony, sparking bipartisan backlash.#Fed #Trump #DOJhttps://t.co/nKiwflcFWg

— Cryptonews.com (@cryptonews) January 12, 2026

“The risk of criminal charges arises from the Federal Reserve determining interest rates based on our best judgment regarding what serves the public interest, rather than bowing to the President’s preferences,” he stated in an unusual televised address.

The ramifications extend beyond monetary policy. Powell cautioned that permitting criminal investigations to sway rate decisions could subordinate economic judgment to political coercion. For cryptocurrency markets—already sensitive to macroeconomic fluctuations—this incident highlights how regulatory stability relies not only on laws but also on the endurance of institutional standards.

Tennessee Judge Suspends State Action Against Kalshi

In a significant check on state-level enforcement, a federal judge in Tennessee has temporarily prevented regulators from acting against the prediction market platform Kalshi.

U.S. District Judge Aleta Trauger granted Kalshi a preliminary injunction and a temporary restraining order against the Tennessee Sports Wagering Council and the state attorney general. The order halts enforcement of a cease-and-desist order while the case unfolds.

A federal judge in Tennessee has temporarily barred state regulators from enforcing actions against @Kalshi.#Kalshi #Cryptohttps://t.co/e0kZWQ05Hf

— Cryptonews.com (@cryptonews) January 13, 2026

Judge Trauger determined that Kalshi would experience “irreparable harm and loss” if state actions continued, stating that the company is likely to prevail on the merits of its claims. Importantly, she noted that Kalshi’s rights would likely be infringed upon without court intervention.

This ruling reinforces a growing judicial skepticism toward state efforts to regulate federally overseen financial products—a trend that could have wider ramifications for derivatives-related crypto products and on-chain prediction markets.

Senate Postpones Market Structure Bill as Bipartisan Divisions Emerge

Progress on comprehensive cryptocurrency legislation has once again slowed, as Senate Agriculture Committee Chairman John Boozman delayed a planned markup of the Digital Asset Market Clarity Act until late January.

The postponement follows negotiations with Democratic lead Cory Booker, as lawmakers strive to finalize unresolved aspects concerning regulatory jurisdiction, stablecoin yields, DeFi protections, and token classification. While the bill aims to divide oversight between the SEC and CFTC, political timing is increasingly becoming a barrier.

Senate defers crypto market structure bill to late January as stablecoin yield provisions and banking lobbying threaten bipartisan support prior to midterm elections.#Crypto #Bill #Senate #UShttps://t.co/TDdQOnl60b

— Cryptonews.com (@cryptonews) January 13, 2026

With the 2026 midterm elections on the horizon, some analysts are now cautioning that final approval could be pushed into 2027. This risk remains despite strong support from the Trump administration and the newly appointed SEC Chair Paul Atkins, who described this week as “a significant moment for crypto” and urged Congress to clarify the regulatory status of digital asset markets.

Revised Timeline, Persistent Tensions

Boozman later confirmed that the legislative text would be made available by the close of business on January 21, with a committee markup set for January 27 at 3 p.m. This announcement followed similar actions by the Senate Banking Committee, where senators reportedly submitted 137 amendments to the CLARITY Act in anticipation of their own markup.

“This timeline ensures transparency and facilitates a thorough review,” Boozman stated, expressing gratitude to Booker for ongoing bipartisan collaboration.

However, the number of amendments emphasizes the unresolved fundamental policy issues—especially concerning enforcement authority, surveillance, and the treatment of decentralized systems.

Galaxy Raises Alarm Over “Patriot Act–Style” Crypto Surveillance

These concerns intensified after Galaxy Digital released a research note cautioning that the Senate Banking Committee’s draft bill could bestow the Treasury Department with extensive new powers reminiscent of the USA Patriot Act.

@galaxyhq alerts that the Senate crypto bill could provide the U.S. Treasury with “Patriot Act-style” surveillance capabilities over DeFi.#DeFi #Senate #Treasury https://t.co/0u8PR3ueM5

— Cryptonews.com (@cryptonews) January 14, 2026

According to Galaxy, the draft exceeds the House-passed Digital Asset Market Clarity Act, particularly in its approach to illicit finance. The concern revolves around a proposed crypto-specific “special measures” authority that would permit the Treasury to identify foreign jurisdictions, financial institutions, or even entire categories of digital asset transactions as primary money-laundering threats.

Such authority, Galaxy contended, risks creating blunt enforcement mechanisms that could deter legitimate activities, fragment liquidity, and drive innovation offshore—outcomes regulators have consistently indicated they wish to prevent.

Coinbase Withdraws Endorsement, Senate Banking Postpones Markup

Industry apprehension escalated when Coinbase announced its withdrawal of support for the Senate Banking Committee’s draft, leading Chairman Tim Scott to delay the committee’s anticipated markup.

CEO Brian Armstrong stated that the exchange could not endorse the bill after a 48-hour review of the text, despite its intention to clarify token classifications and allocate oversight of spot markets to the CFTC.

The Senate Banking Committee postponed its crypto market structure markup after Coinbase retracted support, prolonging uncertainty regarding digital asset regulation. @SenatorTimScott#Coinbase #CryptoRegulation https://t.co/iwG9Za2fed

— Cryptonews.com (@cryptonews) January 15, 2026

This turn of events highlighted a widening divide between lawmakers advocating for expansive enforcement powers and industry participants calling for predictable, proportional regulations. It also emphasized a larger reality: without industry endorsement, even bipartisan legislation risks stagnation.

New York Advocates for Criminalization of Unlicensed Crypto Activity

At the state level, enforcement rhetoric became even more intense. Alvin Bragg, speaking at New York Law School, urged lawmakers to criminalize unlicensed cryptocurrency operations, pointing to what he referred to as a “$51 billion criminal economy.”

Bragg contended that regulatory loopholes enable illicit proceeds from firearms, narcotics, fraud, and terrorism financing to circulate through unlicensed platforms with minimal repercussions. Addressing these gaps, he asserted, is now a key enforcement priority alongside gun violence and organized retail theft.

A senior prosecutor in New York is calling on state legislators to adopt a more stringent approach to cryptocurrency crime, warning against regulatory gaps.#Crypto #Regulationhttps://t.co/9MzjaE3TVT

— Cryptonews.com (@cryptonews) January 15, 2026

While New York has historically adopted an aggressive stance through its licensing framework, Bragg’s remarks indicate a renewed interest in criminal sanctions—not merely civil enforcement—in cryptocurrency oversight.

The Broader Context

Collectively, these developments from the past week illustrate a regulatory landscape under significant pressure. Federal independence, state authority, congressional compromise, and civil liberties are all converging in the cryptocurrency debate. Markets are no longer responding solely to policy results but also to the political processes that drive them.

For digital asset companies and investors, the message is unmistakable: regulatory risk is increasingly intertwined with political risk. Until legislators clarify not only who regulates cryptocurrency—but also the extent of regulators’ power—the industry will remain in a state of cautious uncertainty.

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