😶‍🌫️ Crypto mixers aren’t just for criminals

Treasury tells Congress crypto mixers aren’t only for criminals.

For years, regulators have seen crypto mixers as methods of washing dirty cash. But the new report from the U.S. Treasury to Congress tells a more complicated story.

The agency said that mixers are not used solely for criminal activity. Other users use them for legitimate privacy reasons when making transactions on public blockchains like Bitcoin and Ethereum.

That distinction is important because all blockchain transactions are public. Anyone with knowledge of a wallet address can access its full transaction history, alongside balances.

That degree of visibility can be off-putting for average users.

A donor, supplier payment or interaccount transfer for funds decorum is likely to want that transaction history not plastered on a public ledger. In these instances, mixers increase anonymity of transaction logs and help maintain confidentiality around sensitive financial data.

Treasury officials have recognized that privacy tools can be used for legitimate purposes, like helping make users more resistant to fraud, theft or unwanted scrutiny.

Where privacy stops and crime starts

The Treasury also cautioned that mixers continue to be frequently used by criminals seeking to conceal stolen funds.

Indeed, certain decentralized or non-custodial mixers have been associated with large-scale money laundering activities. Since these systems operate without a central company governing them, they are much more difficult for regulators to monitor or shut down.

The report cited cases involving hackers linked to North Korea’s Lazarus Group, who it says have used mixers to move stolen crypto after exchange hacks.

Custodial mixers: services that take control of users’ funds during mixing and return them once it’s done, could leave breadcrumbs law enforcement would be able to track. Because such platforms are owned and operated by identifiable corporations, authorities have the means to compel them into compliance with financial legislation, or disclose user information when warranted.

Decentralized mixers, though, pose a far greater challenge.

The increasing debate over privacy vs surveillance

The Treasury’s findings come amid calls from lawmakers to increase oversight of the digital asset industry.

In recent years, regulators have proposed widening identity verification requirements for crypto services, claiming stronger compliance rules are needed to tighten the taps on money laundering and sanctions evasion.

One of the more prominent proposals making the rounds is a piece of legislation known as the Digital Asset Market Clarity Act of 2025, or CLARITY bill for short. Supporters say the legislation would provide long-needed regulatory clarity, while critics warn it could drive platforms to gather much more personal data from people.

Privacy advocates say robust enforcement of “know-your-customer” rules could sabotage one of blockchain’s most important selling points: the ability to do business without revealing an abundance of personally identifying details.

Other concerns include that new financial technologies could increase government surveillance. Other investors, including hedge fund boss Ray Dalio, have cautioned that because central bank digital currencies would be issued by empires, authority figures could use them to track financial behaviour more intimately than traditional banking systems allow.

That tension is at the core of the Treasury’s report.

Tools that are designed to protect financial privacy can also make it more difficult for investigators to track illegal activity, leaving regulators to balance an often-complex equation between privacy and security in the digital economy.

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