FinCEN Abandons Unhosted Crypto Wallet Reporting Rule

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has withdrawn a 2020 proposal that would have required banks and money services businesses to report transactions over $10,000 and keep records for transactions over $3,000 involving unhosted crypto wallets. The rule, which had been pending for nearly five years, was deemed non-compliant with the Bank Secrecy Act.

In addition to the wallet rule, FinCEN also pulled a separate proposal that aimed to designate convertible virtual currency mixing as a primary money-laundering concern. Both withdrawals were part of the Trump administration’s deregulatory agenda, intended to align crypto regulations with market realities.

FinCEN cited public comments and Executive Order 14178, 'Strengthening American Leadership in Digital Financial Technology,' as reasons for the withdrawals. The rule had faced significant opposition from the crypto industry, which argued that it would impose unnecessary compliance burdens on users and businesses without effectively addressing illicit finance.

The original proposal would have required identity verification for transactions exceeding $10,000 involving unhosted wallets and recordkeeping for transactions above $3,000. The rule also extended to wallets held at foreign financial institutions.