US Treasury Shifts Stance: Mixers Have Legitimate Privacy Uses, Recommends 'Hold Law' for Suspicious Crypto
In a significant policy pivot, the U.S. Treasury Department has acknowledged that crypto mixers can serve valid financial privacy purposes for lawful users. The March 2026 report to Congress marks a clear departure from Treasury’s 2022 sanction of Tornado Cash and 2023 designations of other mixers as primary money-laundering concerns.
Relevant excerpt:
“Lawful users of digital assets may leverage mixers to enable financial privacy when transacting through public blockchains… to protect sensitive information on personal wealth, business payments, or charitable donations.”
Treasury stops short of recommending new restrictions on non-custodial mixers and does not finalize its 2023 proposed rulemaking on mixer recordkeeping. Instead, it references the July 2025 Presidential Working Group report, which urged balancing illicit finance risks with privacy rights.
Custodial vs Non-Custodial Mixers Differentiated
The report draws a clear distinction:
- Custodial mixers — already required to register with FinCEN as money services businesses — “could provide unique information such as customer identities, off-chain data on transactions, and behavioral patterns” when compliant.
- Non-custodial mixers receive no new restrictions or endorsements.
This framing suggests Treasury sees potential compliance value in regulated custodial services while remaining cautious about fully decentralized tools.
New Original Data on Stablecoin Laundering Flows
Treasury disclosed proprietary analysis on the intersection of mixing, stablecoins, and bridges:
- Since May 2020, > $37.4 billion in withdrawals from over 50 bridges were denominated in the two largest stablecoins (USDT/USDC).
- $1.6 billion in deposits from mixing services flowed into those bridges.
- > $900 million concentrated in a single bridge that “faced scrutiny for failing to intervene in swaps” by DPRK-linked actors.
Direct deposits of stablecoins into mixers for illicit purposes “appears to be low,” but criminals commonly mix other assets first, then swap into stablecoins to break tracing before fiat off-ramping.
Major Legislative Recommendations
Treasury made several concrete asks to Congress:
- Digital asset-specific “hold law” — safe harbor for institutions to temporarily freeze suspicious assets during short investigations (especially useful for stablecoins).
- Clarify which DeFi actors should face AML/CFT obligations based on their roles and risks.
- Add a “sixth special measure” to Section 311 of the USA PATRIOT Act, allowing the Treasury to prohibit or condition certain digital asset transmittals not tied to correspondent banking.
These DeFi recommendations echo Galaxy Research’s January 2026 warning that the Senate Banking Committee’s CLARITY Act draft could represent the biggest expansion of financial surveillance authority since the Patriot Act.
Broader Context & Timing
The report — required under Section 9 of the GENIUS Act (signed July 2025) — was due ~January 14, 2026 and arrived ~7 weeks late after reviewing >220 public comments.
It lands amid shifting enforcement:
- Tornado Cash sanctions lifted March 2025 after appeals court ruling
- Roman Storm convicted August 2025 of unlicensed money transmission (deadlocked on laundering/sanctions)
- DOJ signaling softer stance on developers coding without criminal intent
Industry groups continue pushing for explicit developer protections in final market structure legislation.
Market & Investor Implications
Treasury’s nuanced stance may reduce regulatory pressure on privacy tools while increasing scrutiny on DeFi actors and cross-chain bridges linked to illicit flows. Bitcoin and major altcoins remain stable; no immediate price impact observed.
Investors should:
- Monitor FinCEN, Treasury, and Congress updates on mixer and DeFi rules
- Evaluate privacy tools with regulatory risk in mind
- Watch for any “hold law” or Section 311 expansion
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