Treasury tells Congress mixers have valid privacy uses, recommends 'hold law' for suspicious crypto

The U.S. Treasury Department has acknowledged that crypto mixers can serve legitimate financial privacy purposes, according to a 32-page report submitted to Congress this month. The document marks a shift from the same agency that designated international crypto mixers as money-laundering hubs in 2023 and sanctioned Tornado Cash in 2022.

"Lawful users of digital assets may leverage mixers to enable financial privacy when transacting through public blockchains," the report states. It adds that individuals may use them to protect sensitive information on personal wealth, business payments, or charitable donations.

Criminal use of mixing remains a top concern, however. Treasury's data shows DPRK cybercriminals stole at least $2.8 billion in digital assets between January 2024 and September 2025, including the $1.5 billion Bybit hack, and routinely use mixing in multi-step laundering chains.

Treasury discloses new stablecoin laundering data

One of the report's most notable findings is original Treasury analysis on the intersection of mixing, stablecoins, and cross-chain bridges. Since May 2020, more than $37.4 billion in withdrawals from over 50 bridges were denominated in the two largest stablecoins by market cap, according to the report.

During that same period, approximately $1.6 billion in deposits from mixing services flowed into those bridges. Over $900 million was concentrated in a single bridge that "faced scrutiny for failing to intervene in swaps" by DPRK-linked actors, the report states.

Direct depositing of stablecoins into mixers for illicit purposes "appears to be low," the report notes. But illicit actors commonly channel other digital assets through a mixer first, then swap the output into stablecoins to break the tracing link before converting to fiat.

Custodial mixers get a more favorable framing

The report draws a distinction between custodial and non-custodial mixing services. Custodial mixers are already required to register with FinCEN as money services businesses, and when compliant, "could provide unique information such as customer identities, off-chain data on transactions, and behavioral patterns," the report states.

The report stops short of recommending new restrictions on non-custodial mixers. It also does not finalize or endorse FinCEN's 2023 proposed rulemaking on mixer-related recordkeeping, instead referencing the July 2025 Presidential Working Group report that recommended Treasury "consider next steps" while balancing illicit finance risks with privacy concerns.

Treasury recommends "hold laws"

The report makes several significant legislative asks. It urges Congress to enact a digital asset-specific "hold law" giving financial institutions a safe harbor to temporarily freeze suspicious assets during a short investigation, calling it "particularly useful for countering illicit finance involving permitted payment stablecoins."

On DeFi, it recommends Congress specify which actors should face AML/CFT obligations based on their roles and attendant risks. It also proposes adding a "sixth special measure" to Section 311 of the USA PATRIOT Act, authorizing Treasury to prohibit or impose conditions on certain digital asset transmittals not tied to a correspondent banking relationship.

Those DeFi recommendations echo concerns raised by Galaxy Research in January, which warned that the Senate Banking Committee's version of the CLARITY Act would represent the biggest expansion of financial surveillance authority since the Patriot Act.

An inflection point

The report arrives at an inflection point in the government's approach to crypto privacy. Treasury lifted its Tornado Cash sanctions in March 2025 after a federal appeals court ruled OFAC had overstepped. But in August 2025, a Manhattan jury found co-founder Roman Storm guilty of operating an unlicensed money transmitter, though it deadlocked on money laundering and sanctions charges.

The DOJ has since signaled a softer stance, with a senior official stating that writing code without criminal intent should not trigger prosecution under the money transmitter statute. The Solana Policy Institute and other industry groups have pressed for explicit developer protections in any final market structure legislation.

The report was produced under Section 9 of the GENIUS Act, signed in July 2025, which required Treasury to submit its findings within 180 days. That deadline was approximately January 14; the report is dated March 2026, arriving roughly seven weeks late. Treasury reviewed more than 220 public comments in preparing its findings.