- While the report acknowledged legitimate uses, the Treasury maintained that mixers still remain a concern for illicit finance.
- It’s asked Congress to adopt a digital asset “hold law” allowing financial institutions to temporarily freeze suspicious assets during investigations.
- The department also called for clearer rules defining which participants in decentralized finance should face anti-money-laundering obligations.
The U.S. Treasury Department told Congress this month that crypto mixers can have legitimate financial privacy uses, marking a notable shift from its earlier view that labeled the services as money-laundering hubs and imposed sanctions on Tornado Cash in 2022.
"Lawful users of digital assets may leverage mixers to enable financial privacy when transacting through public blockchains," the department stated in its report. “As consumers increase their use of digital assets for payments, individuals may want to use mixers to maintain more privacy of their consumer spending habits.”
While the report acknowledged legitimate uses, the Treasury maintained that mixers still remain an avenue of crypto crime.
What Are Crypto Mixers?
Mixers are software tools designed to obscure the origin and destination of cryptocurrency transactions by pooling and redistributing funds. Law enforcement agencies have long argued that the technology can help criminals conceal proceeds from hacking, fraud, and sanctions evasion.
In 2022, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) alleged that Tornado Cash had been used to launder over $7 billion in cryptocurrency since 2019. It said that the North Korean hacking collection, the Lazarus Group, used Tornado Cash to launder over $455 million stolen in the Ronin Bridge heist and put the service on the Specially Designated Nationals (SDN) list. This made it illegal for any U.S. citizen to conduct transactions on Tornado Cash.
In its report, the Treasury said the policy challenge lies in balancing privacy protections with the need to keep financial crime at bay.
Treasury Calls For New Authorities To Combat Crypto Crime
The report asked Congress to adopt new legal tools specifically to address illegal cryptocurrency transactions. It proposed a digital asset-specific “hold law” that would allow financial institutions to temporarily freeze suspicious assets during a short investigative period. Treasury said the authority could give banks and other intermediaries a safe harbor when responding to potentially unlawful transactions.
The department also recommended clearer rules for decentralized finance (DeFi) platforms. It suggested that lawmakers specify which participants in the ecosystem should be subject to anti-money laundering and counterterrorism financing obligations, based on the roles they play and the risks they pose.
It proposed that Section 311 of the USA PATRIOT Act should be expanded to include a “sixth special measure.” That authority would allow Treasury to prohibit or impose conditions on certain digital asset transfers even when they are not tied to traditional banks.
The overall cryptocurrency market edged 0.4% higher in the last 24 hours, climbing back above $2.4 trillion. Bitcoin (BTC) rose 0.2% to almost $68,000 while Ethereum (ETH) jumped 1.6% to rouch $2,000 and led gains among crypto majors on Monday morning. Retail sentiment around Ethereum on Stocktwits remained in ‘bearish’ territory over the past day.
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