FinCEN Withdraws Proposed Crypto Mixing and Self-Hosted Wallet Rules

The U.S. Financial Crimes Enforcement Network (FinCEN) has withdrawn two long-standing proposals that would have introduced additional anti-money laundering requirements for cryptocurrency transactions involving self-hosted wallets and crypto mixing.

The withdrawals, effective October 6, 2026, concern proposals first issued in 2020 and 2023. FinCEN said the decisions followed consideration of public comments and form part of the Trump administration's deregulatory agenda and efforts to ensure digital asset regulations are fit for purpose.

The first proposal, published in December 2020, would have required banks and money services businesses to report, retain records and verify customer information for certain transactions involving convertible virtual currency or digital assets held in unhosted wallets.

The proposed requirements would have applied to transactions involving wallets not hosted by a financial institution, as well as certain wallets maintained by financial institutions in foreign jurisdictions identified by FinCEN.

Among other measures, the proposal would have required reporting for transactions exceeding $10,000 within a specified period and additional information concerning the customer and the wallet involved. The proposal was never implemented as a final rule.

FinCEN has now confirmed that it will take no further action on the 2020 proposal.

The second withdrawal concerns a proposed special measure published in October 2023 targeting international convertible virtual currency mixing.

The 2023 proposal sought to classify international cryptocurrency mixing as a class of transactions of primary money laundering concern under Section 311 of the USA PATRIOT Act. It would have enabled the Treasury Department to impose enhanced recordkeeping and reporting requirements on covered financial institutions handling transactions involving international crypto mixing.

Crypto mixers are services or mechanisms designed to obscure the source, destination or transaction history of digital assets by combining funds from multiple users and subsequently redistributing them.

FinCEN has withdrawn both the proposed special measure and the underlying finding that international cryptocurrency mixing constituted a class of transactions of primary money laundering concern.

Neither proposal had taken effect before the withdrawals.

The action does not remove existing anti-money laundering obligations applicable to banks, money services businesses and other regulated entities operating within the U.S. financial system. The withdrawals instead end the two specific rulemaking processes and eliminate the additional requirements that had been proposed.

The withdrawal of the mixing proposal also ends a regulatory process that had remained unresolved since 2023. FinCEN's decision followed comments concerning the scope and potential consequences of the proposed treatment of cryptocurrency mixing.

The agency said the withdrawals are part of its broader review of digital asset regulation and its effort to develop rules that are appropriate for the risks and characteristics of the sector.

By fLEXI tEAM