FinCEN Abandons Proposed Crypto Wallet and Mixer Regulations

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has withdrawn two proposed rules targeting crypto transactions involving self-custodied wallets and mixing services. The announcement, made on October 5, confirms that neither the 2020 wallet proposal nor the 2023 mixing proposal will move forward.

The 2020 proposal aimed to require banks and money services businesses (MSBs) to keep records and verify identities for transactions involving unhosted wallets. Transactions above $3,000 would have required record-keeping, while those exceeding $10,000 would have necessitated reporting to FinCEN. The rule faced backlash due to concerns over feasibility and privacy.

The second proposal, introduced in 2023, targeted crypto mixing services, which obscure the trail of transactions. FinCEN sought additional reporting requirements to combat money laundering and illicit financing, but the plan has now been abandoned. Both withdrawals align with efforts to ensure digital asset regulations are “fit-for-purpose,” according to FinCEN.

The decision means existing Bank Secrecy Act obligations remain in place, but the proposed frameworks for unhosted wallets and mixers will not be enforced. This marks the end of two regulatory proposals that sought to increase scrutiny on private aspects of the crypto market.