A new report submitted to Congress by the U.S. Treasury Department indicates a notable shift in approach regarding cryptocurrency mixing services, a long-standing topic of debate in the cryptocurrency sector. The 32-page report states that crypto mixers are not solely associated with illicit activities and can, in some cases, be used for legitimate purposes, such as protecting financial privacy. This assessment is seen as a significant change in policy tone following the U.S. administration's decision to sanction Tornado Cash in 2022. The Treasury Department had previously characterized some mixing services as hubs used for money laundering. The report emphasizes that because blockchain technology inherently allows all transactions to be publicly accessible, users may occasionally need financial privacy. Individuals may utilize mixing services to protect sensitive information about their assets, keep details of business payments confidential, or conduct charitable donations anonymously. However, the Treasury Department also explicitly states that the use of these tools for illicit activities remains a serious concern. According to the report, North Korea-linked cybercrime groups stole at least $2.8 billion worth of digital assets between January 2024 and September 2025. One of the largest attacks during this period was the Bybit hack, which involved approximately $1.5 billion. The report states that mixing services were used as a crucial part of multi-stage transaction chains in the laundering of the stolen funds.
Money Laundering Traffic via Stablecoins and Bridges
Another noteworthy section of the report concerns data on money laundering activities carried out through stablecoins and blockchain bridges. According to the Treasury Department's analysis, of the total withdrawals from more than 50 blockchain bridges since May 2020, $37.4 billion was conducted in the two most valuable stablecoins by market capitalization.
During the same period, approximately $1.6 billion inflows were detected from mixing services to bridges. It was stated that more than $900 million of this amount was concentrated in a single bridge under investigation due to North Korea-linked laundering activities. The report also notes that the rate at which stablecoins are directly deposited into mixers in illicit activities is relatively low. However, it emphasizes that criminal actors often first pass different crypto assets through mixers and then convert them into stablecoins, thus making it more difficult to trace the transactions.
Distinction between Custodial and Non-Custodial Mixers
The Treasury Department report divides mixing services into two different categories: custodial and non-custodial services. Custodial mixers, which provide custody services, are required to register with FinCEN in the US as a Money Service Operator (MSB).
According to the report, if these platforms comply with regulations, they can provide important information regarding customer credentials, off-chain transaction data, and user behavior. Therefore, it is considered that compliant custodial services can play a certain role in combating financial crime.
On the other hand, the report does not propose new restrictions for non-custodial, or decentralized, mixers. Instead, it states that policymakers need to strike a balance between financial crime risks and user privacy.
Call for New Legislation from Congress
The report also includes some important regulatory proposals for the US Congress. One of these is the creation of a "hold law" that would allow for the temporary freezing of suspicious digital asset transactions. According to the Treasury Department, such a regulation could be particularly effective in combating illicit financial activities associated with stablecoins used for payment purposes. In addition, it was emphasized that it is necessary to clearly define which actors in the DeFi ecosystem should be subject to anti-money laundering and anti-terrorist financing (AML/CFT) obligations. The report also proposes adding a new "sixth special measure" to Section 311 of the US Patriot Act, paving the way for imposing additional conditions on certain digital asset transfers.
A New Era in the Crypto Privacy Debate
The Treasury Department's report was published at a time when the US approach to crypto privacy is at a critical juncture. In 2025, a federal appeals court ruled that the Tornado Cash sanctions exceeded their authority, after which the Treasury Department lifted the sanctions. On the other hand, Roman Storm, one of the founders of Tornado Cash, was found guilty in 2025 of operating an unlicensed money transfer service. The US Department of Justice later stated that merely writing code and developing software without malicious activity should not be subject to criminal prosecution.
