How The CLARITY Act Can Combat Mixer Fraud

Senate Republicans are running out of time to pass the CLARITY Act. The Senate’s August recess is scheduled to begin on August 7th, and Senate Majority Leader John Thune has not yet filed cloture on the bill. Democrats say that a cloture vote would be “doomed” as the White House refuses to budge on the ethics dispute. Indeed, as of Aug. 5, Polymarket’s odds for the CLARITY Act being signed into law in 2026 sat at 16 percent (down from February’s high of 82 percent). 

While this delay is a setback for supporters, it gives Congress more time to reconsider a provision that could unfairly shield some operators of cryptocurrency mixers from oversight before the Treasury Department can determine how to regulate them. Cryptocurrency mixers (or “tumblers”) are services or software protocols that pool or route digital assets from multiple users to obscure the connection between the source and destination of funds. This obfuscation can reduce the public traceability of blockchain transactions, making it easier to conceal ownership, destination, and intent.  

Although the bill would provide welcome regulatory clarity, it may not do enough to address digital asset fraud and consumer-facing scams. This concern becomes increasingly salient as digital asset fraud continues to grow in size and scale. According to the Federal Bureau of Investigation’s Internet Crime Report, the agency received 181,565 criminal complaints related to cryptocurrency in 2025 with approximately $11.37 billion in losses.

The Senate draft’s treatment of mixers is particularly concerning given this frightening rise in digital asset fraud. Section 309 of the CLARITY Act gives the Treasury Department one year to study how mixers are used, what share of their activity is illicit, what legitimate privacy benefits they provide, and how other countries regulate them. The results will ostensibly help lawmakers decide how to regulate mixer activity.

Yet Section 604, also known as the “Blockchain Regulatory Certainty Act” (BCRA), would immediately protect “non-controlling” blockchain developers and service providers from money-transmitter classification, which could encompass mixers. This will shield them from immediate regulation. But why would the bill establish such protection before the Treasury Department completes the study meant to inform those regulations?

The BCRA addresses a genuine problem: Developers who merely publish code or provide noncustodial infrastructure currently face uncertainty under a patchwork of federal guidance and state law. Money-transmitter classification would require a business to register federally, obtain state licenses, establish an anti-money-laundering program, and retain transaction records. However, Section 604 grants exemption from these regulations for those without control or custody over user assets—in other words, the legal right or unilateral ability to control user transactions. Exempted entities would include cryptocurrency software developers, validators, node operators, and compute providers. This is a sound principle, as writing open-source code, validating transactions, operating a node, or providing computing capacity should not automatically classify such entities as financial institution.

However, by categorizing regulatory exemption based on control over user assets, the BCRA may be creating an overly broad safe harbor for mixers and other non-controlling providers. The Treasury’s 2026 National Money Laundering Risk Assessment states that criminals commonly use mixers to obfuscate their digital asset transactions. While the mixers themselves do not necessarily generate fraud, they can weaken the financial trail law enforcement uses to identify perpetrators, freeze proceeds, and return money to victims.

A North Korean cyberattack from 2022 illustrates this problem. The state-sponsored Lazarus Group stole over $600 million in digital assets from a video game, using a mixer to route approximately $455 million. The hack went undiscovered for six days due to its complexity, and law enforcement was only able to retrieve $30 million in stolen assets.

Law enforcement organizations are especially concerned that Section 604 could grant undue exemption for mixers. A coalition representing prosecutors, sheriffs, and police chiefs argued in a June 23 letter that the BCRA’s control-based exemption could shield “mixers, tumblers, and some decentralized finance businesses … from appropriate regulatory obligations.”

Despite these concerns, mixers and tumblers do have legitimate use cases. Research from the Federal Reserve Bank of St. Louis found that “in contrast to popular belief, permissionless blockchains are completely transparent.” As a result, law-abiding Americans use mixers to protect their privacy. These might include protecting personal wealth; supplier relationships and commercially sensitive payments; and donations to political, religious, or humanitarian causes from stalkers or data brokers. Indeed, industry estimates suggest that 75 percent of funds sent to mixers in 2022 originated from non-illicit sources. For instance, Ethereum co-founder Vitalik Buterin admitted to using the then-blacklisted mixer called Tornado Cash to donate to Ukraine’s war effort, thereby hiding recipient identities from the Russian government.

Given the controversial nature of mixers, it is unsurprising that Congress is using the CLARITY Act to commission a study. Section 309 asks the Treasury to explore and document the following:

• Mixer typologies and transaction volume
• Estimated percentage of illicit activity
• Exposure of exchanges and financial institutions
• Non-illicit uses and privacy benefits
• Foreign regulatory approaches
• Possible legislation or regulation

By ordering this review, Congress is acknowledging substantial uncertainty about how mixers are used and how they should be regulated. That in itself is not a problem, except that Section 604’s custody-centric categorization possibly exempts mixers from regulation as money transmitters. If law makes mixers exempt, then the BCRA is effectively claiming that Congress already knows how to regulate them.

That is why the CLARITY Act stalling before recess begins on Aug. 7 could be a blessing in disguise. Rather than rushing through and unintentionally providing an undeserving safe harbor for mixers, the Senate should look to clarify the language in Section 604 before the bill passes. The BCRA should preserve protection for publishing code, validation, node operation, raw computing, and self-custody tools while simultaneously delaying protection for mixers until the Treasury completes the study commissioned in Section 309. Alternatively, senators could consider regulating mixers and other similar entities separately in a new section.

Ultimately, Congress need not choose between treating every coder as a bank and treating every noncustodial service as neutral infrastructure. It can protect passive development while examining whether entities that continuously operate and monetize transaction-obfuscation services should be regulated separately to help law enforcement combat illicit finance. Congress is right to protect developers and right to study mixers—it simply has those two steps in the wrong order.