WASHINGTON — The U.S. Treasury Department is urging financial institutions and policymakers to harness emerging technologies such as artificial intelligence, digital identity tools and blockchain analytics to better combat illicit finance tied to digital assets, according to a report submitted to Congress under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.
The March 2026 report, required by the GENIUS Act signed into law in July 2025, examines how innovative tools and strategies can help regulated financial institutions detect and prevent money laundering, sanctions evasion and other illicit activity involving cryptocurrencies and stablecoins.
Treasury said the rapid expansion of digital assets has increased both opportunities and risks within the financial system. Public blockchain networks processed about 3.8 billion successful monthly transactions in early 2025, a 96% increase from a year earlier, highlighting the scale at which digital assets now operate.
Growing Criminal Activity
The report also points to growing criminal activity tied to digital assets. According to data cited by Treasury, victims reported more than $9 billion in digital asset-related fraud losses to the FBI in 2024, including billions tied to investment scams, ransomware and hacking incidents.
To address those risks, Treasury said financial institutions should increasingly deploy advanced technologies to strengthen anti-money laundering and counter-terrorism financing programs. The report highlights artificial intelligence and machine learning as tools that can analyze large volumes of transaction data to identify patterns linked to illicit finance more effectively.
Digital identity systems are also cited as a priority. Treasury said technologies such as verifiable digital credentials could help institutions confirm customer identities and reduce fraud tied to identity theft and impersonation. The department said it plans to issue guidance to help financial institutions incorporate such tools into their existing customer identification programs.
Role of Blockchain Analytics
In addition, the report emphasizes the role of blockchain analytics in tracking transactions across distributed ledgers and detecting suspicious activity. Treasury said stronger information sharing between financial institutions and blockchain intelligence firms could improve the ability to identify illicit actors operating in the digital asset ecosystem.
Treasury also recommended that Congress consider targeted legislative changes, including a potential “hold law” that would allow financial institutions to temporarily freeze digital assets suspected of being tied to illegal activity during short investigative periods.
The report further examines emerging risks tied to decentralized finance, or DeFi, noting that criminals may attempt to use decentralized exchanges, bridges and mixing services to obscure the origin of stolen funds. At the same time, Treasury said public blockchain data can provide valuable transparency that may help law enforcement trace illicit transactions.
Collaboration Urged
Overall, Treasury said encouraging responsible innovation in financial technology will be critical to strengthening the U.S. anti-money laundering framework while supporting growth in the digital asset sector. The department said collaboration between government agencies, financial institutions and technology firms will be key to developing tools capable of detecting and disrupting illicit finance in rapidly evolving digital markets.
