FinCEN withdraws crypto mixing rule over legitimate activity concerns

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has withdrawn two proposed rules targeting crypto companies, including one on “convertible virtual currency mixing.” In a notice released Monday, the agency scrapped a December 2020 proposal that would have required strict recordkeeping, verification, and reporting for crypto transactions involving unhosted wallets. FinCEN also abandoned a rule from October 2023 that aimed to enforce crypto mixing services, citing concerns that it could stifle legitimate activities and impose excessive reporting burdens on financial institutions.

FinCEN explained that the withdrawal aligns with the Trump administration’s deregulatory agenda and ongoing efforts to ensure digital asset regulations are fit-for-purpose. The move comes amid broader regulatory adjustments by agencies overseeing crypto assets. Earlier on Monday, Commodity Futures Trading Commission Chair Michael Selig announced plans to propose rules for crypto companies under existing statutory authorities without needing additional congressional approval.

Advocacy groups in the crypto and blockchain industry welcomed FinCEN’s decision. The Crypto Council for Innovation praised the reversal on crypto mixers and reporting requirements related to unhosted wallets, calling it a positive step for the digital asset ecosystem.