Galaxy’s Alex Thorn breaks down a U.S. Treasury report flagging $9B in crypto fraud and a proposed DeFi “hold law” safe harbor.
The United States Treasury has outlined new policy ideas aimed at reducing crypto-related crime.
A report submitted to Congress under the GENIUS Act reviews risks tied to decentralized finance. It also proposes measures that could change how institutions handle suspicious digital assets.
Galaxy Research Head Alex Thorn shared details from the report in a social media thread. He pointed to data covering illicit activity, stablecoin flows, and laundering methods.
Thorn also noted that several recommendations appear in draft provisions of the CLARITY Act. The document therefore offers insight into how lawmakers may regulate DeFi.
Treasury Report Details Crypto Fraud Trends
The Treasury report provides a broad look at the digital asset threat landscape. It reviews mixer activity, sanctions evasion, and large-scale fraud schemes.
According to the data, more than $37.4 billion moved through over 50 blockchain bridges since May 2020. Around $1.6 billion came from mixing services before reaching those bridges.
The report also described laundering patterns linked to North Korean actors. Treasury stated that these groups often chain mixers, bridges, and swaps during laundering. Stablecoins frequently appear in the final step when converting funds into fiat.
Fraud remains the largest category of crypto losses. The FBI’s Internet Crime Complaint Center recorded about $9 billion in digital asset fraud in 2024.
Investment scams drove most of those losses. Treasury said victims reported about $5.8 billion tied to such schemes. That figure marked a 47 percent increase from the previous year.
Officials also tracked ransomware payments. The total reached about $734 million in 2024. The report said the amount fell from $1.1 billion in 2023 due to stronger defenses and law enforcement disruption.
in the GENIUS act, congress ordered treasury to produce a report on “innovative technologies” that can help prevent illicit finance
– AI
– digital ID
– blockchain analytics
– APIsand treasury’s analysis of DeFi and the threat landscape also shed light on CLARITY
details 👇 pic.twitter.com/eQ8XKRkNcz
— Alex Thorn (@intangiblecoins) March 7, 2026
DeFi AML Obligations Appear in CLARITY Act Draft
The Treasury report also reviewed how existing financial laws apply to decentralized finance platforms. It recommends that Congress clarify which DeFi services must comply with AML and CFT rules.
According to Thorn, those recommendations align with provisions already included in the CLARITY Act. Title 3 of the draft legislation addresses obligations for DeFi front-end services and platforms that lack full decentralization.
Treasury also urged lawmakers to create digital asset-specific financial institution categories under the Bank Secrecy Act. These categories would carry tailored compliance obligations designed for blockchain-based services.
The report further suggested that the Financial Crimes Enforcement Network review older guidance. FinCEN issued key guidance on digital assets in 2013 and 2019. Treasury said updates may be necessary if new legislation changes regulatory definitions.
Another policy debate centers on money transmission laws. Some industry participants want lawmakers to revise 18 USC 1960. They argue the definition should exclude services that do not control user funds.
Related Reading: US Authorities Seize $580M in Crypto Linked to Chinese Crime Networks
Proposed Digital Asset Hold Law Sparks Debate
One recommendation drew strong attention across the crypto sector. Treasury proposed a digital asset-specific “hold law” for suspicious transactions.
The policy would create a safe harbor for financial institutions. Under the proposal, businesses could temporarily freeze suspected illicit funds during short investigations.
The measure would allow action without a court order in certain cases. However, Treasury said the system should include transparency requirements and consumer protections.
According to Thorn, the Senate draft of the CLARITY Act expands on this concept. Section 305 outlines agency authority, triggers for freezes, and recordkeeping rules. The framework would allow firms to assist Treasury investigations without facing customer liability.
The report also explored emerging compliance technologies.
Treasury discussed artificial intelligence tools used in blockchain analytics. It also examined zero-knowledge proofs for digital identity systems.
Officials acknowledged limits in current blockchain analysis tools. The report also recognized that privacy technologies often serve legitimate purposes.
These findings provide insight into how regulators view digital asset risks. They also show how upcoming legislation could reshape DeFi compliance obligations.
