FinCEN Abandons 2020 Crypto Wallet Rule and Mixer Proposal

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has officially withdrawn a 2020 proposal that aimed to impose stringent reporting and recordkeeping requirements on transactions involving unhosted crypto wallets. The decision marks the end of a rule that had loomed over the crypto industry for nearly five years, as FinCEN confirmed it will take no further action on the proposal.

In addition to the unhosted wallet rule, FinCEN also dropped a separate proposal that would have classified convertible virtual currency mixing as a primary money laundering concern. This classification would have triggered special measures under the Bank Secrecy Act, imposing additional compliance burdens on financial institutions handling such transactions.

The withdrawals were announced as part of the Trump administration’s broader deregulatory agenda, aimed at ensuring digital asset regulations are practical and fit for purpose. FinCEN cited public feedback and the Executive Order 14178, which seeks to align crypto regulation with market realities, as key factors in the decision. Critics of the original rule had argued that it would have placed undue compliance burdens on ordinary users and businesses without effectively addressing illicit finance.

The 2020 proposal, published on December 23, 2020, would have required banks and money services businesses to report any customer transaction exceeding $10,000 involving an unhosted wallet, with identity verification mandatory in such cases. Transactions above $3,000 would have triggered separate recordkeeping requirements. The rule also extended to wallets held at financial institutions in foreign jurisdictions, which FinCEN identified as non-compliant with the Bank Secrecy Act.