The US Treasury Department's blacklisting mechanism has sparked strong opposition in the DeFi community during cryptocurrency discussions.

This week, U.S. lawmakers reignited negotiations on a shelved cryptocurrency market structure bill, with a controversial clause granting the Treasury Department new powers. The clause authorizes the Treasury to coordinate with the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Reserve to place decentralized finance (DeFi) protocols on a “restricted list,” thereby preventing U.S. users from accessing these protocols. Supporters cite national security concerns, but critics warn that the clause grants the Treasury the power to exercise sanctions-level authority without proper due process, threatening privacy and open-source development. The Treasury can prohibit U.S. individuals and institutions from interacting with listed protocols that lack approval. The draft also requires annual DeFi risk reports and decentralization assessments, though the standards for evaluation remain unclear. Critics point to the Tornado Cash case, fearing that broad enforcement could punish neutral infrastructure and innocent users. Republicans tend to favor deregulation to promote innovation, while Democrats advocate for stricter controls on illegal financial activities, including holding developers accountable, raising concerns about overlapping powers and unchecked authority.