FinCEN drops 2020 proposal for unhosted crypto wallet recordkeeping

The U.S. Financial Crimes Enforcement Network (FinCEN) has withdrawn a nearly six-year-old proposal that would have required recordkeeping for certain crypto transactions involving unhosted wallets. The proposal, initially introduced in December 2020, aimed to impose recordkeeping and identity verification requirements for transactions exceeding $3,000 and reporting obligations for transactions over $10,000.

FinCEN announced the withdrawal in a Federal Register notice set to publish on October 6. The rule would have applied to banks and money services businesses (MSBs) when dealing with unhosted wallets or wallets hosted in jurisdictions identified by FinCEN. The decision aligns with the Trump administration's approach to digital asset regulation, as outlined in a report from the President’s Working Group on Digital Asset Markets.

In addition to the unhosted wallet proposal, FinCEN also withdrew a separate rule targeting cryptocurrency mixing transactions. Both withdrawals followed public comments received during the rulemaking processes. The move means the proposed $3,000 recordkeeping threshold and $10,000 reporting requirements will not take effect, though existing Bank Secrecy Act obligations still apply to regulated institutions.