The U.S. Department of the Treasury has proposed that Congress create a new law tailored to digital assets, allowing crypto exchanges to temporarily freeze funds tied to suspected illegal activity while investigations are ongoing. The proposal, included in a March 2026 report submitted under the GENIUS Act, was delivered seven weeks after the January 14, 2026 deadline.
Hold Law Would Give Exchanges Legal Cover
The report introduces a “hold law” that would provide a safe harbor for exchanges to freeze assets during probes. Currently, suspicious activity reporting (SAR) rules prevent platforms from disclosing investigations. Ari Redbord of TRM Labs said the law would create a window for law enforcement to act as digital assets move quickly on blockchains. Andrew Rossow, CEO of AR Media Consulting, noted that the law would resolve legal uncertainty around freezing funds without a court order.
Exchanges today face a dilemma: let funds move or risk liability by freezing them. Under the hold law, platforms could legally pause transfers linked to suspected illicit activity. The Treasury report also emphasizes the use of blockchain analytics to detect suspicious transactions, while acknowledging potential vulnerabilities such as the reliability of analytics tools and conflicts with SAR “tipping off” rules.
Mixers: Balancing Privacy and Criminal Abuse
Treasury recognized the legitimate use of mixers for financial privacy on public blockchains but also noted criminal abuse. DPRK-linked cybercriminals stole at least $2.8 billion between January 2024 and September 2025, often using mixers in laundering chains.
Custodial mixers provide traceable data and must register with FinCEN, while non-custodial mixers are not subject to new restrictions. The report stops short of finalizing FinCEN’s proposed 2023 mixer recordkeeping rules, suggesting a need to balance privacy with anti-money-laundering concerns.
Stablecoins and Cross-Chain Bridge Activity
According to the report, stablecoins are frequently involved in cross-chain bridge activity, with over $37.4 billion withdrawn from bridges since May 2020.
DeFi and Next Regulatory Steps
The Treasury report also recommends clarifying AML/CFT obligations for DeFi actors and introducing a “sixth special measure” under the USA PATRIOT Act. The document reviewed over 220 public comments, aiming to close gaps in tracking illicit activity while acknowledging privacy and legal challenges.