On March 9, the U.S. Department of the Treasury recently urged Congress to consider introducing a “freezing law” for digital assets, granting crypto platforms the authority to temporarily freeze funds involved in suspected illegal activities during investigations. This aims to strengthen the fight against cryptocurrency fraud and money laundering. The recommendation appears in a report submitted by the Treasury to Congress, drafted under the framework of the GENIUS Act, focusing on regulating illegal financial activities in the digital asset space.
The report notes that while legitimate users sometimes use mixers to protect transaction privacy, such technology can also be exploited by criminals. The Treasury suggests establishing a legal safe harbor mechanism that allows financial institutions to voluntarily freeze digital assets related to suspicious transactions during investigations, preventing funds from quickly transferring or converting across blockchain networks.
Ari Redbord, Head of Global Policy at TRM Labs, stated that current crypto platforms can use blockchain analysis tools to identify abnormal fund flows, but lack clear legal grounds to hold related assets for extended periods. If the new law passes, it would provide a legal window for platforms to initiate legal procedures before blockchain transactions are completed, enhancing cooperation between government agencies and private sector entities.
Public affairs attorney Andrew Rossow pointed out that traditional banks already have some authority to delay suspicious transactions, but this mechanism remains legally controversial, and the situation is even more complex for crypto platforms. While institutions can submit suspicious activity reports, there are currently no clear regulations allowing them to freeze funds without a court order or sanctions authorization.
Rossow also warned that the proposal may still have legal conflicts. For example, transparency rules might require disclosure of account freeze information, while suspicious activity reporting systems prohibit explaining specific investigations. This could lead to situations where user assets are frozen without knowing the reasons, creating new regulatory gray areas.
Despite ongoing debates, Redbord believes this measure could become an important tool in combating crypto crimes. He pointed out that given the faster transaction speeds in digital asset markets compared to traditional finance, granting platforms limited freezing rights might help narrow the response time gap between law enforcement and blockchain fund movements.
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