US Treasury Signals New Rules for Crypto Mixers

The United States Department of the Treasury has explicitly acknowledged in a report to Congress that cryptocurrency mixing services can serve legitimate privacy needs for lawful users, even as it seeks expanded authority to freeze suspicious digital assets.

A March 2026 report to Congress, submitted under the GENIUS Act framework, marks a shift in tone after years of enforcement actions that largely portrayed mixing services as tools for illicit finance. The same filing proposes new legal powers that would allow crypto platforms to temporarily freeze customer assets during investigations without filing formal charges.

The report reflects a growing regulatory balancing act as policymakers weigh financial privacy against efforts to curb sanctions evasion, cybercrime, and money laundering.

Illicit Finance Still Driving Policy

The Treasury said actors linked to North Korea stole at least $2.8 billion in digital assets between 2024 and 2025, frequently using mixing services to obscure transaction trails.

Blockchain data cited in the report shows that of the $37.4 billion withdrawn from blockchain bridges using stablecoins since 2020, roughly $1.6 billion passed through mixers. More than $900 million remains concentrated in a bridge wallet tied to North Korean operations.

Officials say those figures illustrate the core regulatory dilemma: tools designed to protect financial privacy can also enable large-scale laundering by state-sponsored hackers.

Privacy Demand on Transparent Blockchains

While highlighting illicit finance risks, the Treasury acknowledged that the transparency of public blockchains can expose sensitive financial activity.

Because most blockchain networks permanently record transaction histories, individuals and businesses may seek privacy tools to protect personal wealth, shield commercial payments from competitors, or keep charitable donations confidential, the report said.

The department added that demand for transaction privacy is likely to grow as digital asset payments expand.

That language differs from earlier enforcement actions targeting mixing services such as Tornado Cash, which the Treasury sanctioned in 2022 through the Office of Foreign Assets Control over its alleged use by the North Korea-linked Lazarus Group.

The new report does not reverse those sanctions but formally acknowledges that privacy-preserving tools can also support lawful financial activity.

Developer Liability Debate Continues

Privacy advocates and developers have long argued that open-source privacy software should not automatically be treated as criminal infrastructure.

Vitalik Buterin, co-founder of Ethereum, previously defended the use of mixing tools during the legal proceedings involving Roman Storm, a developer associated with Tornado Cash.

Storm was convicted in August 2025 of conspiracy to operate an unlicensed money-transmitting business. A jury deadlocked on additional charges related to money laundering and sanctions violations, leaving him facing a potential five-year prison sentence.

The Treasury’s latest language stops short of endorsing those arguments but partially reflects them by recognising legitimate privacy use cases.

Proposed Freeze Authority

The report’s most consequential recommendation is a new legal authority allowing cryptocurrency platforms to temporarily freeze digital assets linked to suspicious activity during investigations.

The proposal – sometimes described as a “hold law” – would allow platforms to temporarily hold suspicious assets during investigations before formal legal action.

Under existing rules tied to the Financial Crimes Enforcement Network, platforms that file Suspicious Activity Reports are generally prohibited from disclosing details of those investigations to customers.

Supporters say temporary freezes could help prevent stolen funds from quickly moving across blockchain networks, while critics argue the framework could leave users unable to access assets without clear explanations or timelines.

The report also calls for clearer definitions of which decentralised finance platforms must comply with anti-money laundering and counter-terrorism financing rules.

Together, the proposals suggest regulators are preparing to expand oversight of privacy tools while acknowledging their growing role in digital asset markets.