The Financial Crimes Enforcement Network (FinCEN) has officially withdrawn two proposed anti-money-laundering rules, dropping planned reporting mandates for unhosted crypto wallets and crypto mixing services.
FinCEN Scraps 2020 Unhosted Wallet Tracking Rules
Under the original 2020 proposal, financial institutions and crypto exchanges would have been required to verify customer details and record transactions involving personal or unhosted wallets exceeding $3,000. Furthermore, single transfers or cumulative daily transactions exceeding $10,000 would have triggered mandatory currency transaction reports directly to FinCEN.
The rule never took effect. FinCEN stated in its filing that withdrawing the proposal ensures digital asset regulations remain "fit-for-purpose," citing guidance from a July 2025 White House crypto report. The report noted that "the Trump Administration supports the ability of lawful users of digital assets to privately transact on a public blockchain." The official withdrawal takes effect upon publication in the Federal Register on October 6, coinciding with broader enforcement actions where the US Treasury inspects illegal financial flows.
Mixing Proposal Dropped Ahead of 2027 Target
FinCEN simultaneously dropped a 2023 proposal focused on convertible virtual currency mixing. That plan sought to require domestic firms to report transactions suspected of using foreign-linked mixers. Prior to this decision, the Treasury's regulatory agenda had scheduled December 2027 for final action on the rule.
FinCEN noted that public commenters warned the mixing definition could chill legitimate blockchain privacy activities. However, the bureau warned that illicit actors still utilize mixers and reserved the right to pursue future regulatory action. Existing compliance duties, including suspicious activity reports (SARs) and sanctions screening, remain fully in force. Meanwhile, developers continue to face legal scrutiny, with Tornado Cash developer Roman Storm scheduled for an Ethereum mixing service retrial in April 2027.
Key Takeaways
- Unhosted Wallet Mandate Dropped: FinCEN cancelled 2020 rules requiring records for transfers over $3,000 and reporting for transfers above $10,000.
- Mixer Rule Withdrawn: Dropped the 2023 mixing reporting proposal previously slated for final action in December 2027.
- Federal Register Notice: The withdrawal officially takes effect on October 6.
- Ongoing Legal Actions: Suspicious activity reporting remains active, while Roman Storm faces an April 2027 retrial.
Why It Matters
This dual withdrawal marks a significant shift in U.S. regulatory posture toward preserving transactional privacy on public blockchains. By eliminating proposed compliance barriers for unhosted wallets, federal authorities reduce operational burdens for exchanges while supporting basic self-custody rights. However, ongoing criminal prosecutions against privacy developers demonstrate that federal law enforcement will continue targeting mixing protocols through judicial action rather than broad administrative rules.
