FinCEN withdraws crypto mixing rule proposal citing concerns over legitimate activity

The U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) has withdrawn its 2023 proposal aimed at tightening reporting requirements for cryptocurrency mixing transactions. The decision follows concerns raised during the rulemaking process that an overly broad definition of mixing could stifle legitimate activity and impose undue reporting burdens on financial institutions. FinCEN acknowledged these concerns but maintained that illicit actors still use mixers to evade law enforcement tracking.

The October 2023 proposal sought to designate international convertible virtual currency (CVC) mixing transactions as a 'primary money laundering concern,' requiring banks and financial institutions to report details such as wallet addresses, transaction hashes, and IP addresses. FinCEN also cited a July 2025 report by the President's Working Group on Digital Asset Markets, which highlighted that lawful digital-asset users may use mixers to protect financial privacy on public blockchains.

FinCEN also withdrew a separate 2020 proposal related to unhosted wallets, which would have required banks and money services businesses to verify customer identities and keep records for transactions above $3,000 involving unhosted wallets. The measure would have also mandated reporting for transactions exceeding $10,000. Since neither proposal was finalized, there is no change to the current obligations imposed on financial institutions.

The move reflects a shift in the Treasury Department's policy, recognizing that crypto mixers can have legitimate privacy uses. Earlier in March 2025, the Treasury removed Ethereum-based mixer Tornado Cash from its sanctions list, and in a report submitted to Congress in March 2026, it acknowledged that mixers can be used for lawful privacy-protection purposes.