Fincen withdraws proposed crypto mixer rule citing regulatory burden

The Financial Crimes Enforcement Network (Fincen) has withdrawn its proposed rule targeting foreign cryptocurrency mixers, which aimed to combat money laundering linked to ransomware and North Korean hackers. The proposal, introduced in October 2023, would have required banks to report customer transactions involving mixers, services that obscure the origin of crypto assets. Fincen cited concerns that the rule could stifle legitimate financial activity and impose a heavy reporting burden on institutions, estimating about 15,000 institutions would have spent 1.47 million hours annually on compliance.

The withdrawal is part of the Trump administration's broader deregulatory agenda. Fincen acknowledged that criminals still use mixers but noted that the proposed rule could have had unintended consequences. The banking industry's response was muted, with only the Independent Community Bankers of America (ICBA) submitting comments, arguing that the rule did not go far enough. ICBA remains disappointed by the withdrawal, citing the well-documented risks of mixers in illicit finance.

Mixers have been a tool for laundering funds, with the 10 largest mixers processing over $20 billion between January 2011 and August 2022, and about 13% of their deposits coming from illicit sources. Despite this, Fincen's notice misquoted a White House report, falsely attributing a statement about financial privacy to the report. The Treasury did not address the misquote when questioned.

With the withdrawal, banks retain their existing duty to report suspicious activity but are no longer required to specifically report mixer-related transactions. The 2026 National Money Laundering Risk Assessment still lists mixers as a common tool for criminals to hide illicit crypto transactions. Fincen also withdrew a 2020 proposal targeting unhosted wallets, another effort to curb financial crimes in the crypto space.