The U.S. Treasury Department is finalizing a sweeping rule that could outlaw the use of software designed to obscure cryptocurrency transactions, marking one of the most aggressive moves yet in Washington’s oversight of digital assets.

Andrea Gacki, Director of the Financial Crimes Enforcement Network (FinCEN), told lawmakers this week that the measure — informally referred to as the “mixer rule” — is now in its final stage. Built on powers granted by the PATRIOT Act, the rule would expand anti-money laundering controls to cover privacy-focused tools that regulators see as a threat to transparency.

The proposal casts a wide net. Not only would cryptocurrency mixers fall under the category of “primary money laundering concern,” but common practices such as splitting transactions, rotating wallets, swapping coins, or delaying transfers could also be treated as suspicious activity. Critics say this language is so broad it risks criminalizing normal user behavior, drawing parallels to “smurfing” — the long-standing financial crime of breaking large sums into smaller transfers.

The move coincides with renewed momentum in Congress for the Special Measures to Fight Modern Threats Act, legislation that would give the Treasury even greater latitude to block transactions routed through foreign exchanges, miners, or validators. Detractors argue this could force U.S. banks and trading platforms to withdraw from global crypto activity altogether, calling the approach “authoritarian” and overly punitive.

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Supporters contend the rules are necessary to stop money laundering and terrorist financing, pointing to how privacy-enhancing technologies have been misused by criminals. But industry advocates warn that an outright ban would not only target illicit actors but also harm individuals in repressive countries who rely on such tools for basic financial protection.

The Treasury Department has not given a firm timeline, but insiders expect the final contours of the regulation to be unveiled in the coming weeks — a development that could reshape how Americans are allowed to use cryptocurrency at home and abroad.

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