US Treasury Acknowledges Crypto Mixer Users' Right to Financial Privacy

The US Department of the Treasury has delivered a report to Congress officially acknowledging the right of law-abiding citizens to use crypto mixers for financial privacy protection. Just two to three years ago, the same agency branded mixers as money laundering centers and imposed sanctions on Tornado Cash.

Why This Matters

The Treasury's stance has undergone a dramatic transformation — from direct sanctions against mixing protocols to recognizing their legitimacy as privacy tools. This shift sends a clear signal to the broader crypto industry: US regulators are seeking a middle ground between combating illicit finance and respecting users' right to transactional confidentiality. For privacy-focused projects, this evolution could mean a more predictable regulatory landscape going forward.

According to the report, law-abiding users rely on mixers to shield information about personal savings, business payments, and charitable donations. The department noted, however, that criminal misuse of these platforms remains a persistent concern.

The DPRK Threat: $2.8 Billion in Stolen Crypto

The Treasury provided hard numbers on illicit mixer usage. Between January 2024 and September 2025, hackers linked to North Korea stole $2.8 billion in cryptocurrency. Of that total, $1.5 billion came from the Bybit exchange hack alone. These threat actors routinely funnel stolen funds through mixers to obscure transaction trails.

Stablecoins and Cross-Chain Bridges Under Scrutiny

For the first time, the department analyzed the interplay between mixers, stablecoins, and cross-chain bridges. Key findings include:

• Since May 2020, users moved more than $37.4 billion in the two largest stablecoins through 50 different bridges.
• During the same period, approximately $1.6 billion flowed from mixers to these platforms, with over $900 million passing through a single service popular among North Korean hackers.

The typical laundering pattern involves depositing non-fiat-pegged crypto assets into a mixer, then converting the output to stablecoins — effectively breaking the transaction chain before cashing out to fiat.

Custodial vs. Non-Custodial Mixers

The report draws a clear regulatory line between two categories of mixing services. Custodial platforms must register with FinCEN and can provide authorities with client data and transaction records upon request. For non-custodial services, the Treasury declined to recommend additional restrictions, signaling its intent to balance illicit finance risks against citizens' privacy rights.

Treasury's Legislative Proposals

The department asked Congress to enact several new measures:

• Asset freeze authority — financial institutions would gain the power to temporarily block suspicious crypto assets during investigations.
• DeFi regulatory clarity — Congress should define which decentralized finance participants fall under AML requirements.
• "Sixth special measure" under US anti-terrorism law — the Treasury seeks authority to block cryptocurrency transfers outside correspondent banking relationships.

A Broader Shift in Privacy Policy

The report arrives amid a broader softening of the US government's approach to crypto privacy. In March 2025, the Treasury lifted sanctions on Tornado Cash following a court ruling. In August, co-founder Roman Storm was convicted of operating without a license, but the jury failed to reach a verdict on money laundering charges.

Matthew Galeotti from the US Department of Justice announced that the agency would stop prosecuting DeFi application developers under unlicensed money transmission statutes. Then in January 2026, Senators Cynthia Lummis and Ron Wyden introduced legislation that would exempt software developers and non-custodial service providers from money transmitter licensing requirements.

Taken together, these developments point toward an emerging US regulatory framework that acknowledges privacy tools while simultaneously strengthening controls over illicit financial flows.