FinCEN Withdraws Controversial Crypto Mixing and Wallet Rules

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has withdrawn two proposed crypto rules, marking a significant shift in regulatory approach. The first proposal, introduced in October 2023, aimed to classify international crypto mixing as a “primary money laundering concern.” The second, from December 2020, sought to mandate identity checks for transactions involving self-hosted wallets. FinCEN cited concerns that the 2023 proposal’s broad definition of mixing could unfairly target legitimate privacy-focused users.

FinCEN’s decision aligns with the Trump Administration’s deregulatory agenda, aiming to ensure digital asset rules are “fit-for-purpose.” The agency acknowledged that while some bad actors use mixers to evade detection, others employ them for lawful privacy reasons. The withdrawal of the 2020 proposal on self-hosted wallets also reflects FinCEN’s effort to update its approach to digital assets. Neither proposal was ever finalized, so existing rules remain unchanged.

Crypto advocacy groups welcomed the move. Coin Center argued that the mixing rule’s definition was overly broad and could have affected routine privacy practices. The Crypto Council for Innovation also praised the withdrawal, calling it a positive step for the digital asset industry. This development follows Treasury’s removal of the crypto mixer Tornado Cash from its sanctions list in March 2025, further signaling a more nuanced stance on crypto privacy tools.