Witnesses at the Senate Committee on Banking, Housing, and Urban Affairs hearing said blockchain's public ledger provides new tools for tracing illicit activity, but also identified practical enforcement gaps that limit government responses.

Jonathan Levin, CEO of Chainalysis, told the committee his firm has “helped the US government seize over $12,400,000,000 of criminal proceeds.” Levin said the public ledger and private‑sector analytics make it easier in many cases to trace flows than cash, but he cautioned that anonymization tools and movement of funds to foreign jurisdictions create barriers to recovery.

Why it matters: Lawmakers repeatedly raised concerns about ransomware, sanctions evasion and large heists. Witnesses said a functioning federal framework should ensure agencies and state and local law enforcement have the tools and technical capacity to act quickly and to cooperate internationally.

Levin said the illicit share of on‑chain activity is small relative to total volumes: “the illicit activity that we estimate at Chainalysis is less than 1% of the overall activity that occurs on these blockchains,” and he added that centralized services subject to AML and Bank Secrecy Act obligations have been crucial to investigating cases. Levin also cited a recent example in which “OKX, and stablecoin issuer, Tether, froze and then seized $225,000,000 of criminal proceeds in collaboration with US Secret Service.”

Witnesses and senators discussed anonymization tools such as mixers and cross‑chain bridges. Levin acknowledged mixers are used by illicit actors but noted that tracing through some mixes is possible and that investigations often require cooperation from foreign jurisdictions and centralized intermediaries.

Several witnesses urged strengthening capacity at federal, state and local levels. Levin recommended building government capacity to monitor public blockchains proactively rather than relying solely on after‑the‑fact reports. Senators asked whether state and local agencies have the necessary tools; witnesses said capabilities are uneven and identified a technology barrier to entry that public‑private partnerships and training can help close.

FinCEN guidance and existing AML/BSA regimes were discussed as operating authorities for centralized intermediaries; witnesses said those frameworks are relevant but that consistent supervision and cross‑agency coordination are needed to make enforcement effective.

Ending: Committee members indicated they will consider provisions that strengthen supervisory and investigatory powers, improve interagency coordination and expand tools for state and local law enforcement as they draft market‑structure legislation.