The U.S. Treasury Department has delivered a comprehensive 32-page report to Congress, mandated by the GENIUS Act, which signals a significant recalibration in the government's approach to blockchain privacy tools, particularly bitcoin and crypto mixers. The report acknowledges that these tools can serve legitimate financial privacy purposes for lawful users, who may employ them to protect sensitive information related to personal wealth, business payments, or charitable donations when transacting on public blockchains. This perspective represents a shift from previous stances, such as the 2022 sanctioning of Tornado Cash and the 2023 designation of international mixers as money-laundering hubs.

However, the report simultaneously highlights the persistent exploitation of mixers by criminal actors, notably those linked to North Korea. Treasury data indicates that DPRK-affiliated cybercriminals stole at least $2.8 billion in digital assets between January 2024 and September 2025, including a substantial $1.5 billion hack of the Bybit exchange. Mixers are commonly employed in these illicit operations to obscure transaction trails, often in conjunction with stablecoin swaps and cross-chain bridges.

The Treasury's analysis also delves into mixing activity involving stablecoins and bridges. Since May 2020, over $37.4 billion in withdrawals from more than 50 bridges were denominated in the two largest stablecoins by market capitalization. Of this sum, approximately $1.6 billion originated from mixing services, with over $900 million concentrated in a single bridge scrutinized for DPRK-linked activities. While direct stablecoin deposits into crypto mixers for illicit purposes are relatively low, criminals frequently convert other digital assets through mixers before swapping them into stablecoins to further obscure the source.

The report differentiates between custodial and non-custodial crypto mixers. Custodial services are required to register with FinCEN as money services businesses and can provide valuable identity data, off-chain transaction information, and behavioral patterns. Significantly, the Treasury does not recommend new restrictions on non-custodial mixers and has refrained from finalizing FinCEN’s proposed recordkeeping rule from 2023. Instead, it references a 2025 Presidential Working Group report that advises careful evaluation of both privacy and illicit finance risks.

To combat illicit activity, the Treasury urged Congress to enact a digital asset-specific “hold law,” which would create a temporary safe harbor for financial institutions to freeze suspicious assets during brief investigations. This tool is deemed particularly useful for countering illicit finance involving permitted stablecoins. Furthermore, the report recommends that Congress specify which actors in decentralized finance (DeFi) should bear anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations, based on their roles and associated risks. It also proposes expanding Section 311 of the USA PATRIOT Act to grant the Treasury authority to impose conditions on certain digital asset transfers that fall outside traditional correspondent banking relationships. These legislative proposals echo concerns from industry groups, such as Galaxy Research, which have warned about potential expansions of financial surveillance authority.

This report emerges at a pivotal moment for crypto regulation. The Treasury had lifted Tornado Cash sanctions in March 2025 following a federal appeals court ruling that OFAC had exceeded its authority, though co-founder Roman Storm was later convicted of operating an unlicensed money transmitter. The Department of Justice has also indicated a more focused approach to prosecuting developers, suggesting that creating privacy tools without criminal intent should not constitute a violation. The Treasury framed this report as part of a broader initiative to study “innovative or novel” tools for detecting illicit activity in crypto, fulfilling its mandate under the 2025 GENIUS Act. The document incorporates insights from over 220 public comments and consultations with diverse stakeholders, including financial institutions, blockchain analytics firms, crypto firms, and law enforcement.