FinCEN Withdraws Crypto Wallet and Mixer Reporting Proposals

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has withdrawn two long-pending cryptocurrency proposals. On October 5, FinCEN dropped reporting requirements for certain self-custody wallet transactions and a proposed surveillance framework for cryptocurrency mixers. The agency cited public comments and efforts to align digital-asset regulation with current needs as reasons for the withdrawals.

The first proposal, introduced in December 2020, aimed to impose recordkeeping, verification, and reporting requirements on transactions involving unhosted wallets or wallets in specific jurisdictions. Banks and money services businesses would have had to report transactions exceeding $10,000 and keep records for transactions above $3,000. FinCEN reopened and extended the comment period in January 2021, reviewing over 7,500 public comments before deciding to withdraw the proposal.

The second proposal, introduced in October 2023, targeted cryptocurrency mixing. FinCEN classified international mixing as a primary money laundering concern and proposed requiring financial institutions to report suspected mixing transactions. The agency acknowledged concerns about the broad definition of mixing and its potential impact on legitimate activities, leading to its withdrawal. FinCEN emphasized that it would continue monitoring mixer activity for illicit financial risks.

The withdrawals align with recommendations from the President’s Working Group on Digital Asset Markets, which supported lawful private transactions on public blockchains. However, FinCEN retained authority under the Bank Secrecy Act to monitor and act against illicit financial activity involving digital assets. The agency has also proposed customer identification requirements for stablecoin issuers and continues rulemaking against sanctions-evasion networks.