FinCEN Abandons Controversial Crypto Wallet Reporting Proposal

The U.S. Financial Crimes Enforcement Network (FinCEN) has abandoned a 2020 proposal that aimed to impose additional reporting and identity verification requirements on transactions involving self-custody crypto wallets. Announced on October 5, the withdrawal follows an extensive review of over 7,500 public comments and forms part of broader deregulatory efforts under the Trump administration.

The proposal, which would have required banks and money services businesses to record transactions above $3,000 and report those exceeding $10,000 involving unhosted wallets, faced significant backlash. Critics argued that the rules could push users toward less regulated self-custody solutions, undermining the intended anti-money laundering (AML) goals.

FinCEN clarified that existing Bank Secrecy Act obligations remain in place, but the agency will not pursue the specific framework outlined in the 2020 proposal. The decision reflects a shift toward more targeted regulatory measures, rather than a retreat from digital-asset enforcement. Additionally, FinCEN is withdrawing a separate proposal related to international crypto mixing services.

For crypto exchanges and wallet users, the withdrawal means that the proposed compliance hurdles for transactions between regulated platforms and self-custody wallets will not take effect. The move aligns with efforts to make digital-asset rules more 'fit-for-purpose,' balancing regulatory oversight with the evolving nature of blockchain technology.