The U.S. Treasury Department recognizes mixers as having legitimate privacy uses but still recommends Congress establish a freezing law to control suspicious crypto assets.

The U.S. Department of the Treasury, which previously sanctioned Tornado Cash, has for the first time acknowledged in a report submitted to Congress that legitimate users employing mixers to protect financial privacy have valid reasons. The report also recommends that Congress pass legislation granting financial institutions the authority to “temporarily freeze” suspicious digital assets.
(Background: The U.S. Treasury Department reverses Tornado Cash sanctions—digital assets create value opportunities, TORN surges 74%!)
(Additional context: From sanctions to legal trials: privacy and responsibility debates surrounding Tornado Cash mixers)

Table of Contents

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• Recommend Congress Establish a “Freezing Law”: Temporarily Freeze Suspicious Crypto Assets
• Non-custodial Mixers Remain a Concern
• Privacy Issues Continue to Escalate

Recently, the U.S. Department of the Treasury submitted a report to Congress titled “Using Innovative Technologies to Combat Illegal Financial Activities Involving Digital Assets.” This document, authorized under the GENIUS Stablecoin Act, officially recognizes that cryptocurrency mixers serve legitimate privacy purposes for the first time. The report states:

Legitimate digital asset users may utilize mixers to maintain financial privacy when conducting transactions on public blockchains.

The Treasury further explains that as consumers increasingly use digital assets for payments, individuals may wish to use mixers to protect sensitive information such as personal wealth, business payments, or charitable donations from exposure on public blockchains.

This shift in stance is significant—the same Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash in 2022, only lifting the sanctions in March 2025.

Recommend Congress Establish a “Freezing Law”: Temporarily Freeze Suspicious Crypto Assets

In addition to recognizing the legitimacy of mixers, the report proposes several legislative measures. The most notable is calling for the creation of a dedicated “Freezing Law” for digital assets, providing a safe harbor for financial institutions to temporarily freeze suspicious assets during short-term investigations.

The report states that this mechanism “is especially useful for combating illegal financial activities involving permissioned stablecoins.” It also urges Congress to clearly define which DeFi participants should be subject to AML/CFT obligations.

Non-custodial Mixers Remain a Concern

While acknowledging the legitimate uses of mixers, the Treasury expresses concern over non-custodial, decentralized mixers. The report notes that such services are often used for money laundering and sanctions evasion, including by North Korea-linked hacking groups that extensively use decentralized services to transfer illicit gains.

The report suggests that custodial mixers (centralized services that temporarily hold user funds) can provide identifying information to help trace transaction flows; however, non-custodial mixers operate without intermediaries, making it impossible to collect user identities or respond to law enforcement requests.

Privacy Issues Continue to Escalate

On-chain privacy has become a highly contentious issue by 2025, with U.S. lawmakers pushing for stricter KYC requirements for digital asset service providers and DeFi platforms. Paradigm policy vice president Alexander Grieve has pointed out that current regulations do not sufficiently protect open-source software developers.

Regarding Tornado Cash, although sanctions have been lifted, co-founder Roman Storm still faces criminal charges related to unlicensed remittances. This case highlights a fundamental legal dilemma: should developers who create open-source privacy tools be held responsible for others’ illegal uses?