FinCEN withdraws crypto mixing tracking proposal amid privacy concerns

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has withdrawn its controversial 2023 proposal aimed at tracking cryptocurrency mixing activities. The decision, announced on October 5 and set for official publication on October 6, follows concerns that the proposal could have unfairly targeted legitimate privacy transactions alongside illicit ones.

The proposal sought to designate international crypto mixing transactions as a primary money laundering concern, requiring banks and financial institutions to report details such as wallet addresses, transaction IDs, and even IP addresses. Critics, including Coinbase, argued that the lack of a monetary threshold could lead to excessive reporting of non-suspicious transactions, creating a burden for institutions.

FinCEN acknowledged feedback indicating that the broad definition of mixing activities, which included methods like pooling funds, splitting transactions, and using one-time wallets, could discourage legitimate privacy use. The agency also referenced a July 2025 report from the President’s Working Group on Digital Asset Markets, which noted that users may legally use mixers for financial privacy on public blockchains.

While FinCEN will continue monitoring activities linked to mixers, the withdrawal of the proposal does not alter existing obligations for financial institutions. Additionally, the agency withdrew a separate 2020 proposal that would have imposed stricter identity verification requirements for transactions involving unhosted wallets.