Treasury Urges Congress to Give Crypto Platforms Power to Freeze Suspicious Funds
The U.S. Treasury has recommended Congress establish a digital asset-specific “hold law” allowing crypto platforms to temporarily freeze digital funds suspected of involvement in illegal activity. This law would provide a safe harbor for financial institutions to pause transfers during investigations, a gap that currently exists due to unclear legal authority. Such measures would give law enforcement and exchanges time to investigate suspicious transactions and prevent rapid movement or conversion of illicit funds. Currently, exchanges risk legal exposure if they freeze funds, as no clear statutory protection exists without a court order. The proposal aims to strengthen the partnership between authorities and crypto platforms, aiding efforts against money laundering and fraud. However, issues remain unresolved, such as transparency conflicts—platforms may have to disclose a freeze without being able to explain the reason due to suspicious activity reporting rules—potentially creating legal ambiguities. Despite these concerns, Treasury and industry experts argue that a narrowly tailored hold authority would provide a critical tool to address illicit crypto activity and help law enforcement keep up with the rapid pace of digital asset transactions.
