Treasury Abandons Crypto Wallet Surveillance Proposals
The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) has withdrawn two proposed crypto rules, ending rulemakings that had been in limbo for years. The first, proposed in December 2020, would have required banks and money services businesses to report customers' transactions to self-custodied wallets and verify identities for transfers over $10,000. The second, introduced in 2023, aimed to classify crypto mixing as a primary money laundering concern. Both proposals drew significant public comment, with 7,685 responses to the wallet rule and 2,239 to the mixing rule. FinCEN stated it will take no further action on the wallet rule but left open the possibility of revisiting the mixing proposal.
Hours after FinCEN’s withdrawal, the Commodity Futures Trading Commission (CFTC) opened a rulemaking that would create a federal regulatory framework for crypto exchanges offering retail leverage. CFTC Chairman Michael Selig described the framework as elective, allowing exchanges to choose between federal oversight or state money transmission laws. The proposal also codifies delivery to a non-custodial wallet within 28 days as an exception to on-exchange trading. Comments on the rulemaking are due 60 days after its publication in the Federal Register.
In other news, onchain investigator ZachXBT revealed details of a Chinese syndicate allegedly laundering over $1 billion for North Korea’s Lazarus Group, including funds from the Bybit hack. ZachXBT spent weeks posing as a client, providing 349,700 USDC to build trust and exposing a cluster holding $12 million in Bybit proceeds. Tether froze 442,000 USDT tied to the cluster. Meanwhile, OKX and Intercontinental Exchange (ICE) announced plans to trade tokenized U.S. stocks in permissioned Uniswap v4 pools on X Layer, the first venue to use the SEC’s September exemption. Traders must complete KYC and wallet screening to participate.
S&P Global also launched the Vault Risk Assessment, a letter-scale opinion grading the risk of loss for depositors in onchain lending vaults. The scale ranges from AAA(v) to D(v), with the curator’s score playing a key role in the rating. Deposits in these vaults reached $10 billion in September, up from $1.5 billion two years earlier.