Treasury Abandons Crypto Mixer and Self-Hosted Wallet Reporting Rules
The U.S. Treasury Department has abandoned two long-standing regulatory proposals targeting cryptocurrency mixing services and self-hosted wallets. On October 5, the Financial Crimes Enforcement Network (FinCEN) announced it is withdrawing a 2023 proposal that aimed to impose new reporting requirements on financial institutions handling transactions tied to international crypto mixers. The agency also scrapped a 2020 measure that would have required additional obligations for banks and money services businesses dealing with self-hosted wallets.
The 2023 proposal, which invoked Section 311 of the USA PATRIOT Act, sought to designate international convertible virtual currency mixing as a primary money laundering concern. It would have required financial institutions to report transactions involving mixers and retain detailed customer information. However, FinCEN acknowledged concerns that the broad definition of mixing could have chilled legitimate activity and created significant reporting burdens.
FinCEN emphasized that the withdrawal does not indicate mixers are low-risk, as illicit actors still use them to obstruct investigations. The decision aligns with a broader shift in how the Treasury Department views blockchain privacy, recognizing that lawful users may employ mixers for privacy while bad actors use them for illicit purposes. The policy environment has also been influenced by the litigation over Tornado Cash, an Ethereum-based mixer removed from the sanctions list in March 2025.
On the same day, FinCEN terminated the 2020 proposal targeting self-hosted wallets, which would have required institutions to verify customer identities and maintain transaction records for transactions above $3,000. The withdrawal of these proposals does not remove any existing compliance requirements for regulated crypto businesses, and FinCEN retains the authority to target specific services linked to illicit finance.
Privacy advocates, such as Coin Center, welcomed the Treasury Department's decision, describing it as a meaningful gain for financial privacy. The group emphasized that American users should not face unnecessary surveillance mechanisms when transacting through personal wallets. The practical effect for investors and crypto businesses is a reduction in regulatory uncertainty for self-custody and privacy-focused infrastructure, though existing anti-money-laundering duties remain in force.