The U.S. Treasury’s March 2026 report to Congress on innovative technologies to counter illicit finance is framed around AML and national security. It evaluates how financial institutions can use tools like artificial intelligence, blockchain monitoring, digital identity, and APIs to detect illicit activity in digital assets.
But beneath the compliance framing, the report highlights a broader structural issue in digital markets. Trading infrastructure has evolved quickly while settlement and capital movement infrastructure are still catching up.
Treasury notes that public blockchain activity reached “3.8 billion monthly transactions in early 2025, a 96 percent year-over-year increase.” Digital markets now operate continuously across jurisdictions, asset types, and venues. Capital can move globally in seconds, yet the operational systems supporting that movement remain fragmented. That gap appears repeatedly throughout the report.
Fragmentation Is Structural
One of Treasury’s central concerns is jurisdictional and operational fragmentation.The report highlights that many digital asset service providers operate with “a distributed architecture where they register in one country, have personnel in a second country, maintain data on servers located in a third country, and offer services in several countries with different legal and regulatory approaches.” This structure complicates oversight, but it also creates operational complexity for institutions moving capital across platforms.
Traditional financial markets solved this decades ago through defined participation frameworks, standardized settlement processes, and centralized clearing structures. Digital asset markets remain far more loosely connected, liquidity is global and infrastructure is fragmented.
For institutions operating across exchanges, trading venues, custodians, and counterparties, this fragmentation introduces operational friction around settlement timing, counterparty transparency, and capital movement.
Monitoring Open Networks Has Limits
Treasury also focuses heavily on blockchain analytics tools used by financial institutions to monitor activity on public networks. These tools allow firms to trace transactions, cluster addresses, and flag suspicious behavior, and they are increasingly embedded in institutional compliance programs.
But the report also acknowledges their limitations.
Treasury notes that “blockchain analytics platforms often rely on probabilistic heuristics to draw conclusions.” These tools can identify patterns, but they are fundamentally reconstructive. They analyze activity after it has occurred.
Obfuscation techniques complicate this further. Illicit actors frequently use “mixing, bridging, and swapping to introduce challenges for investigators attempting to trace illicit digital assets.”
This highlights an important distinction.
Monitoring tools attempt to interpret activity after the fact. Infrastructure design can reduce risk before transactions occur.
Stablecoins as Liquidity Rail
Stablecoins appear throughout the report as a central liquidity instrument in digital markets. They are widely used for trading, cross-chain transfers, and settlement across exchanges and intermediaries.
At the same time, Treasury notes that stablecoins frequently appear as one step within more complex transaction chains. The report states that “stablecoins are often used as one element of a complex laundering process that includes the use of mixers.”
This observation reflects the role stablecoins now play as a core liquidity rail across digital markets. When assets move across multiple blockchains, trading venues, and services, transaction paths can become increasingly complex.
The faster markets operate, the more important the underlying settlement structure becomes.
APIs Are Becoming Foundational
One of the most forward-looking sections of the report focuses on APIs. Treasury describes APIs as “the connective tissue of modern compliance frameworks.” They allow platforms, custodians, exchanges, and financial institutions to communicate and exchange data in real time. APIs enable automated onboarding checks, transaction monitoring, sanctions screening, and interoperability between systems.
This reflects a broader shift in financial infrastructure. As markets move toward continuous trading, the systems responsible for moving capital must operate with the same speed and integration. Programmatic infrastructure is replacing manual reconciliation.
The Bigger Signal
Taken together, the report reflects a simple point: digital markets have expanded faster than the infrastructure that supports them. Trading is continuous and capital moves quickly across venues and blockchains, while settlement frameworks and interoperability standards are still developing. Treasury’s focus on APIs, monitoring tools, and institutional oversight points to the need for more coordinated infrastructure around how capital moves and how counterparties interact across platforms.
Sources
REPORT TO CONGRESS FROM THE SECRETARY OF THE TREASURY ON INNOVATIVE TECHNOLOGIES TO COUNTER ILLICIT FINANCE INVOLVING DIGITAL ASSETS, March 2026. https://home.treasury.gov/system/files/246/GENIUS-Act-Illicit-Finance-Innovation-Congressional-Report-March-2026.pdf