FinCEN Withdraws Crypto Mixing Reporting Proposal After Backlash

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has withdrawn its proposed rule targeting crypto mixing, a technique used to obscure transaction details. Announced on October 5, the decision scraps both the 2023 finding that international crypto mixing is a primary money laundering concern and the proposed recordkeeping and reporting rule. The withdrawal is set to take effect upon its scheduled publication in the Federal Register on October 6.

FinCEN cited concerns from commenters that the broad definition of mixing could stifle legitimate activities and impose heavy reporting burdens. The proposal would have required financial institutions to report details of transactions involving mixing, including wallet addresses, transaction hashes, and customer identity information. The agency also clarified that certain internal processes used by banks and money services businesses would not be affected, provided they maintained necessary records.

Despite the withdrawal, existing anti-money laundering rules for crypto money transmitters remain in place. These include registration requirements, customer checks, recordkeeping, and suspicious activity reporting. FinCEN also confirmed the withdrawal of the unhosted-wallet proposal, originally published in December 2020, stating it will take no further action on that rule. The agency emphasized its continued monitoring of crypto mixing for illicit activities and may take further steps in the future.