Treasury Urges Congress to Give Crypto Platforms Power to Freeze Suspicious Funds

The U.S. Treasury has proposed a digital asset-specific 'hold law' that would allow crypto platforms to temporarily freeze suspicious funds during investigations. The recommendation, part of a report under the GENIUS Act, aims to establish legal clarity for institutions involved in digital asset transfers. The move addresses the lack of statutory protections currently available for freezing assets linked to illegal activity.

The proposed 'hold law' would create a safe harbor for institutions, enabling them to pause suspicious digital transactions without facing legal risks. This is particularly important in the fast-moving and complex crypto space, where traditional financial tools struggle to keep up with transaction speeds and privacy features.

Experts have weighed in on the potential benefits and challenges of such a law. Ari Redbord of TRM Labs and Andrew Rossow of AR Media Consulting note that the law could improve collaboration between public and private sectors. It would also help law enforcement react more swiftly to illicit transactions.

Why Did This Happen?

The U.S. Treasury's report highlights the growing use of digital assets in illicit activities, including fraud, cybercrime, and money laundering. In 2024 alone, the FBI reported $9 billion in losses from crypto scams. The report argues for updated anti-money laundering (AML) and counter-terrorist financing (CFT) measures tailored to the unique characteristics of digital assets.

Stablecoins, in particular, have become a focal point of regulatory attention. Transactions involving stablecoins such as USDT and USDC are increasingly used in unhosted wallets, making them harder to trace and regulate. The Financial Action Task Force (FATF) has flagged these as significant money laundering risks.

What Are Analysts Watching Next?

Policymakers are now urging Congress to clarify obligations for DeFi participants and other actors with operational control over transaction flows. The Treasury's report suggests defining AML/CFT responsibilities based on specific roles within the DeFi ecosystem, such as front-end platforms and stablecoin issuers.

The report also highlights the importance of technological capabilities for monitoring and intervening in suspicious transactions. Stablecoin issuers already use blockchain analytics to identify and freeze risky activity. However, legal uncertainties remain around the extent to which platforms can intervene without court orders.

What About Stablecoins and Unhosted Wallets?

The FATF report underscores the growing risks posed by unhosted wallets and stablecoin transfers. In 2025, 84% of $154 billion in illicit transactions involved stablecoins, according to Chainalysis. The report calls for technical capabilities to detect and freeze transactions involving addresses linked to money laundering or terrorist financing.

Regulators are also looking to enforce compliance measures, such as allowing-lists in smart contracts and enhanced blockchain analysis tools. The FATF notes that entities in countries like North Korea and Iran have increasingly used stablecoins to launder cybercrime proceeds. This has raised the urgency for stricter oversight.

Policymakers are now considering broader adoption of AML tools and stricter regulation of stablecoin issuers. The goal is to prevent abuse while maintaining the innovation and utility of stablecoins in legitimate financial systems.