U.S. Treasury softens stance on crypto mixers, acknowledges legitimate privacy uses
The U.S. Treasury Department signaled a notable shift in its approach to crypto “mixers” — on-chain services that jumble funds to hide the origin and destination of transactions — saying these tools can have lawful, privacy-preserving uses in addition to their well-known role in criminal finance.
In a report connected to implementation of the Genius Act, the Treasury acknowledged that mixers can legitimately help users protect personal financial details on public blockchains. Examples cited include safeguarding consumer spending patterns, business transactions and charitable donations from becoming publicly traceable. The department also suggested privacy tools can be built to work alongside compliance, through measures such as record-keeping and other safeguards.
“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,” the report notes.
Why this matters
Mixers have been controversial in Washington for years. They obscure transaction trails by pooling many users’ funds, making it harder to link addresses to real-world actors. In 2022, the Treasury’s Office of Foreign Assets Control (OFAC) blacklisted the Ethereum mixer Tornado Cash, accusing it of facilitating laundering tied to North Korea’s Lazarus group — a move that effectively barred Americans from using the tool and sparked major regulatory pushback.
That saga evolved: in 2025 Tornado Cash was removed from the sanctions list after legal challenges and an appellate court questioned Treasury’s authority to sanction open-source smart contracts. Tornado Cash co-founder and developer Roman Storm was released on bail, though prosecutors say they retain evidence that he built features into the mixer knowing they could aid cybercriminals — meaning legal exposure remains.
Treasury’s balancing act
The report does not abandon AML concerns. It reiterates that mixers are frequently used to obscure stolen funds and emphasizes the need for stronger anti-money-laundering controls across the crypto ecosystem. At the same time, the Treasury states explicitly that privacy technology is not inherently illegal and suggests policy approaches that aim to reconcile privacy with enforcement.
Policy recommendations and next steps
Beyond mixers, the Treasury used the report to flag broader shifts in policy thinking. Key recommendations include:
- Asking Congress to clarify which decentralized finance (DeFi) actors should be subject to AML obligations;
- Exploring digital-identity tools that enable compliance while minimizing unnecessary data collection; and
- Considering new authorities that would allow institutions to temporarily freeze suspicious digital assets.
What’s next for the industry
The report signals regulators are moving toward a more nuanced framework: one that recognizes legitimate privacy needs on public ledgers while still pressing for robust AML controls. For the crypto industry, that could mean greater demand for privacy tools architected with compliance in mind, and renewed pressure on lawmakers to define responsibilities across DeFi and related services. For regulators and courts, the Tornado Cash litigation underscores lingering legal and constitutional questions about how to regulate open-source blockchain code.
Overall, the Treasury’s position suggests Washington is ready to explore middle-ground solutions that preserve user privacy without ceding ground on illicit finance — but the path from policy proposals to enforceable rules remains uncertain.
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