U.S. Treasury, via the GENIUS Act, proposes a law to give crypto platforms/CEXs clear legal authority to temporarily freeze suspicious funds to stop illicit transfers within minutes and boost cooperation with law enforcement. The rule fills a legal gap and aims to strengthen crypto security and institutional adoption, but creates legal and transparency risks for platforms (potential lawsuits, conflicts with financial reporting and disclosure rules); DEXs remain technically unaffected. Passage would likely improve anti-crime defenses and market confidence in crypto infrastructure but increase regulatory scrutiny and operational complexity for exchanges.

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U.S. Treasury proposes a law to freeze suspicious crypto funds.
The rule aims to fight crypto crime faster.

The U.S. government is asking Congress to consider a new rule that allows crypto platforms to temporarily freeze suspicious funds linked to illegal activities. This proposal comes from the U.S. Department of the Treasury, which is connected to the GENIUS Act. This act focuses on the tools to protect against financial crimes involving digital assets.

Reason behind the Treasury’s need for this law

Right now, crypto exchanges can detect suspicious transactions through blockchain tracking tools, but they do not always have a clear legal authority to freeze them. This creates problems, like if the exchanges let the transaction continue, then the funds could disappear quickly, and if the exchanges freeze the funds without legal protection, they could face lawsuits. This law creates a legal framework allowing exchanges to temporarily hold suspicious assets.

If the law receives approval, crypto exchanges could halt transfers before criminals shift their funds across multiple wallets. Supporters say this would strengthen cooperation between crypto companies and law enforcement agencies. The temporary freeze could stop money from being stolen or illegal funds from being used within minutes.

Legal experts say that the proposal raises several complicated issues. Andrew Rossow, who was a public affairs attorney, explained that the banks already have limited powers to delay suspicious transactions. Another concern involves transparency rules. If a platform freezes someone’s assets, it may have to disclose the freeze to the users. At the same time, financial reporting laws may prevent the platform from explaining the investigations.

President Donald Trump has been urging Congress to move faster on the digital assets legislation as regulators and banks argue over how the industry should be governed. This treasury proposal aims to close a major gap by giving exchanges clear authority to freeze suspicious funds.

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Read the article at TheNewsCrypto