The United States Department of the Treasury has urged Congress to clarify which participants in the decentralized finance (DeFi) ecosystem should fall within anti-money laundering (AML) requirements, in a report prepared under the GENIUS Act. The report examines how emerging technologies can help detect illicit financial activity involving digital assets, including stablecoins, and highlights gaps in the current regulatory framework. In particular, it notes that existing rules under the Bank Secrecy Act were not designed for decentralized systems where control may be distributed and protocols can operate without central intermediaries.

To address this, Treasury is calling for clearer legal definitions of DeFi roles and responsibilities, with a focus on identifying points of control where AML obligations could be applied. It suggests that protocols with concentrated governance - for example where a small group controls key decision-making through governance tokens - should not fall outside regulatory scope. On the international front, Treasury also proposes expanding its powers under Section 311 of the Patriot Act to cover certain digital asset transactions, allowing restrictions to be imposed even in the absence of traditional correspondent banking relationships.

The report also outlines practical measures to strengthen enforcement. These include introducing a digital asset “hold law” that would allow institutions to temporarily freeze suspicious funds during investigations, and clarifying that modern digital identity tools - such as verifiable credentials and privacy-preserving technologies - can meet existing customer identification standards. Drawing on extensive industry feedback, the report reflects Treasury’s broader effort to adapt financial crime controls to the realities of decentralized and cross-border digital finance while maintaining regulatory effectiveness.