FinCEN Abandons Long-Standing Crypto Surveillance Proposals

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) is withdrawing two long-standing crypto surveillance proposals that never became law. The first, proposed in December 2020, aimed to impose recordkeeping and reporting obligations on banks and money services businesses dealing with self-custody or “unhosted” wallets. Transactions above $3,000 would have required identity verification, while those over $10,000 would have triggered reporting to FinCEN.

The second proposal, introduced in October 2023, targeted cryptocurrency mixing, defining it broadly to include various privacy techniques. Covered financial institutions would have faced enhanced reporting obligations, including collecting customer details like names, birth dates, and addresses. Critics argued the definition risked ensnaring legitimate privacy practices in a regulatory dragnet.

FinCEN’s withdrawal acknowledges concerns that the mixer proposal could stifle lawful activity and create significant compliance burdens. However, the agency maintains its focus on monitoring mixing for illicit finance risks. The reversal reflects a shift in Washington’s stance on digital-asset privacy, as recent reports now support the right to private transactions on public blockchains.

While the proposals are being formally buried, existing anti-money-laundering (AML) and suspicious activity reporting rules remain in place. The practical change means two layers of crypto reporting, one from 2020 and another from 2023, are no longer a compliance threat for self-custody and privacy tools.