US Treasury Backs Regulated Crypto Mixers, Seeks New Laws

Key Insights

• The US Treasury says in a new report that crypto mixers have a use case for financial privacy.
• The report, intended for Congress, appears to favor custodial mixers that comply with anti-money laundering rules.
• Treasury wants Congress to introduce new laws that will enable digital assets regulations for AML/CFT compliance.

The US Treasury Department has acknowledged that crypto mixers have valid financial use cases. In a report to Congress, the Department noted that these mixers can be used to ensure privacy on public blockchains.

It marks a sharp turnaround from the Department’s earlier stance on cryptocurrency mixers. They claimed they serve money-laundering purposes.

Treasury Backs Custodial and Regulated Mixers

The report is titled “Report to Congress From the Secretary of the Treasury on Innovative Technologies to Counter Illicit Finance Involving Digital Assets.” It is based on a provision of the GENIUS Stablecoin Act.

Under the Act, the Treasury Department is directed to research digital assets applications and address their illicit use.

According to the report, use of digital assets has skyrocketed in recent years. With this, the monthly transaction volume reached 3.8 billion in early 2025. However, it acknowledged that the growth has also come with several threats and vulnerabilities.

Mixers are considered a vulnerability. The report noted that mixers and other transaction-obfuscation services can be used to facilitate illicit activities. It noted that some mixing services are advertised to evade AML/CFT or sanctions requirements.

Despite this, it acknowledged that lawful users also leverage these mixers for financial privacy when using public blockchains. It is expected that such use to grow as more people use digital assets for payments,

The report stated:

However, the report appears to endorse custodial mixing services. It noted that digital asset services that take custody of user funds must register with FinCEN as money service businesses.

According to the report, such mixers comply with record-keeping requirements. When this happens, they can be used to detect illicit financing, as they provide unique information.

Still, it noted the prevalent use of mixing services by bad actors. This includes state-sponsored hackers, ransomware groups, money launderers, and darknet market participants.

Treasury Recommends New Laws to Monitor Digital Assets Use

Interestingly, the report claimed that stablecoins play a crucial role in enabling illicit use of digital assets through mixing services.

There are low deposits of stablecoins directly into mixing services. However, bad actors usually swap other digital assets into stablecoins after withdrawing them from mixers.

Since May 2020, investors have withdrawn over $37.4 billion in USDT and USDC. These withdrawals came from more than 50 bridges. In that period, deposits from mixing services to those bridges were around $1.6 billion.

To address what it considers the illicit use of digital assets, Treasury is now asking Congress to enact new laws. These include a law that will allow financial institutions to temporarily freeze suspicious asses pending quick investigations.

It also wants Congress to clarify rules for DeFi by determining which participants must comply with AML/CFT obligations. The Department wants authority under Section 311 of the Patriot Act. It seeks power to block digital asset transactions not tied to a correspondent banking relationship.

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