U.S. Treasury acknowledges legitimate crypto mixer uses as Tornado Cash developer faces retrial request with potential decades-long prison exposure

Policy report on privacy tools emerges as prosecutors seek October retrial for Tornado Cash co-founder Roman Storm

TL;DR

• U.S. Treasury told Congress in March 2026 that crypto mixers can have legitimate privacy uses while still raising law-enforcement concerns.
• Investigators reported $2.8 billion in cryptocurrency stolen by North Korean cyber groups between January 2024 and September 2025, including $1.5 billion linked to a hack targeting Bybit.
• Prosecutors requested an October 2026 retrial for Tornado Cash developer Roman Storm after a jury failed to reach a verdict on charges carrying potential prison terms of 20 years each.

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U.S. Treasury officials told Congress that cryptocurrency mixing services may serve legitimate financial privacy purposes, according to a government report released in March 2026. Officials wrote that users sometimes rely on mixers to prevent exposure of sensitive transaction histories on transparent blockchain networks where payments are permanently visible through public ledgers. The report stated that individuals may use the technology to keep spending patterns, savings activity, and business transactions confidential, noting that blockchain transparency differs significantly from privacy protections typically found in traditional banking systems.

Treasury’s findings acknowledged that some users employ mixing services to protect personal wealth or shield payment flows tied to companies and nonprofit organizations. Officials also cited anonymous charitable donations among examples of lawful uses described in the report. At the same time, authorities said the same technology has been used in large-scale laundering operations involving cybercrime proceeds, ransomware attacks, fraud schemes, and sanctions evasion.

Government investigators said North Korean cyber groups stole approximately $2.8 billion in cryptocurrency between January 2024 and September 2025. Treasury researchers linked a large portion of the activity to a hack targeting the Bybit exchange that resulted in losses totaling $1.5 billion. Officials said digital assets connected to these thefts often passed through mixing services before moving across multiple blockchains.

Treasury analysts examined how stablecoins and cross-chain bridges were used in laundering pipelines. Their report said more than $37.4 billion in the two largest stablecoins had moved through about 50 blockchain bridges since May 2020. Authorities also traced roughly $1.6 billion in assets leaving mixing services and flowing into bridge infrastructure during that same period.

Investigators added that more than $900 million moved through a single mixing service reportedly favored by North Korean hackers. Treasury researchers said criminals rarely send stablecoins directly into mixers. Instead, investigators wrote that attackers typically move volatile crypto assets through mixing services first and later convert the output into stablecoins before using exchanges or other platforms capable of converting the funds into fiat currency.

Treasury’s report proposed regulatory measures instead of blanket prohibitions on privacy technologies. Officials recommended legislation allowing financial institutions to temporarily freeze suspicious digital assets during investigations under a new “hold” authority. Policymakers also urged Congress to clarify how anti-money-laundering rules apply to decentralized finance participants and suggested expanding Section 311 of the USA PATRIOT Act with an additional enforcement mechanism referred to as a sixth special measure.

Regulators distinguished between custodial and non-custodial mixing platforms in their policy recommendations. The report said custodial operators should register with the Financial Crimes Enforcement Network and maintain the ability to provide transaction records to investigators. Non-custodial decentralized protocols were not recommended for additional restrictions.

Debate surrounding mixers has intensified since the U.S. Treasury’s Office of Foreign Assets Control sanctioned Tornado Cash in August 2022. Authorities said the protocol had laundered more than $7 billion in cryptocurrency since launching in 2019. Enforcement officials tied more than $455 million of that activity to the Lazarus Group, a hacking organization linked to North Korea and several major crypto thefts.

Sanctions made it illegal for U.S. persons to interact with the Tornado Cash protocol and triggered the removal of infrastructure including website domains and GitHub repositories associated with the project. Treasury later removed those sanctions in March 2025 after a court ruled regulators may have exceeded their authority by targeting open-source software rather than identifiable individuals or organizations.

Legal battles tied to Tornado Cash have continued in federal court. Roman Storm, a co-founder and developer of the privacy protocol, was charged by U.S. prosecutors with conspiracy to operate an unlicensed money-transmitting business, conspiracy to commit money laundering, and conspiracy to violate sanctions laws. Storm’s trial lasted four weeks and concluded in August 2025 in the U.S. District Court for the Southern District of New York.

Jurors convicted Storm of operating an unlicensed money-transmitting business, a charge carrying a maximum prison sentence of five years. The jury failed to reach unanimous verdicts on the remaining counts, prompting the judge to declare a mistrial on those charges. Each unresolved charge carries a potential penalty of 20 years in prison.

Federal prosecutors filed a letter to Judge Katherine Polk Failla on March 9, 2026 requesting a new trial to address the unresolved counts. Government lawyers asked the court to schedule the retrial for early October 2026 and proposed either October 5 or October 12 as possible starting dates. Prosecutors told the court they expected the retrial to last approximately three weeks.

Storm’s legal team opposed scheduling a retrial immediately while pursuing a Rule 29 motion seeking to overturn the conviction related to the money-transmission charge. Attorneys argued that the evidence presented during trial was insufficient to support the verdict. Oral arguments for the motion are scheduled for April 9.

Prosecutors told the court the government wanted a retrial date set soon to avoid delays tied to courtroom scheduling. Prosecutors argued during the trial that Tornado Cash functioned as a laundering tool used to obscure more than $1 billion in illicit funds connected to hacking operations and other cybercrime activity.

Storm’s defense team told jurors that Tornado Cash operates as decentralized open-source software that developers cannot control once deployed. Storm criticized the prosecution’s approach publicly, stating the government was attempting to criminalize programming work and warned that the unresolved charges could lead to decades in prison “for writing open-source code.”

Supporters across the cryptocurrency industry have rallied behind Storm. More than 65 crypto organizations urged U.S. President Donald Trump to intervene in the case. Groups including the Ethereum Foundation and the DeFi Education Fund have supported Storm’s defense fund, helping raise more than $5 million to cover legal costs.

This article has been refined and enhanced by ChatGPT.