The US Financial Crimes Enforcement Network (FinEN) is withdrawing its proposed crypto mixing rule and scrapping its unhosted wallet proposal. Neither the 2020 nor the 2023 draft ever took effect, so obligations for banks and crypto service providers remain unchanged.

FinCEN, the US Treasury Department's anti-money laundering agency, enforces the Bank Secrecy Act, the foundational statute of US anti-money laundering law. Under Section 311 of that statute, it can designate jurisdictions, financial institutions, or entire classes of transactions as a primary money laundering concern and order special measures against them. Crypto mixers pool many users' transactions to obscure the payment trail. Unhosted wallets are self-custody wallets that users control without an exchange or custodian.

FinCEN first presented the wallet proposal in December 2020, in the final weeks of Trump's first administration. Under President Biden, a draft special measure followed in October 2023 that would have treated crypto mixing as a separate transaction class. In early October 2026, the agency announced the withdrawal of both drafts. Publication in the Federal Register, the official journal where US federal rules are published, followed a day later. The wallet draft would have required financial institutions to record counterparty data from USD 3,000.

FinCEN withdraws the 2023 crypto mixing rule

The October 2023 draft relied on Section 311 and declared crypto mixing a transaction class of primary money laundering concern. Institutions would consequently have had to report transactions involving crypto mixing with a link to a foreign jurisdiction. Those reports would have covered wallet addresses, transaction hashes, and IP addresses — meaning FinCEN would have received users' connection data, not just details of the payments themselves.

In its press release, FinCEN justified the withdrawal by citing the Trump administration's deregulatory agenda and the goal of tailoring digital asset rules appropriately. The withdrawal notice in the Federal Register also lists objections to the draft itself. Commenters had warned that the broad definition of mixing could have a chilling effect on legitimate activity, and institutions faced a heavy reporting burden. The definition was "extraordinarily broad," according to Coin Center, an advocacy group that had long opposed both proposals. In its view, the wording captured common techniques that ordinary users rely on to protect their privacy.

The stated reasons therefore concern the scope and cost of the rule, not the money laundering risk posed by mixers. Indeed, FinCEN still assumes that illicit actors use mixers to hamper investigations.

Unhosted wallet proposal falls after almost six years

The December 2020 wallet draft targeted banks and money services businesses, a category that includes money transmitters and currency exchangers. Besides data collection from USD 3,000, the text provided for a reporting requirement for transactions above USD 10,000. The rule would have created "a double standard for crypto transactions," Coin Center argued.

With the withdrawal, the existing framework stays in place. Anti-money laundering obligations under the Bank Secrecy Act continue to apply unchanged, and the sanctions of the Office of Foreign Assets Control (OFAC), the Treasury unit that administers US sanctions, remain in force.

The sequence of US policy steps since 2025 is notable. It began in March 2025, when OFAC removed the mixer Tornado Cash from its sanctions list, unwinding a designation first imposed in August 2022. At the end of July 2025, a presidential working group on digital asset markets released its report, on which both withdrawals now rely. In a report to Congress in March 2026, the Treasury Department recommended no new restrictions on non-custodial mixers and chose not to finalize the 2023 mixing draft. The current withdrawal makes that decision formal.

Self-hosted wallets in the EU and Switzerland remain tightly regulated

In the EU, the Transfer of Funds Regulation (EU) 2023/1113 (TFR) has applied since late December 2024. It applies the Travel Rule — the requirement to transmit originator and beneficiary data alongside transfers — to crypto transfers without a de minimis threshold, departing from the USD 1,000 or EUR 1,000 benchmark of the Financial Action Task Force (FATF), the intergovernmental body that sets global anti-money laundering standards. Transfers above EUR 1,000 to or from a self-hosted address carry an additional duty: the crypto-asset service provider (CASP) must verify whether the address belongs to the customer, using at least one reliable, independent method such as a signed message or a Satoshi test, in which the wallet owner sends a tiny amount of cryptocurrency from the wallet in question to an address specified by the service provider. Guidelines from the European Banking Authority (EBA), likewise applicable since late 2024, stipulate that a mere self-declaration by the customer is not enough. Pure peer-to-peer transfers without a service provider, however, remain outside the regulation.

Switzerland has taken a tighter line since August 2019, when the Swiss Financial Market Supervisory Authority FINMA issued supervisory guidance. Supervised institutions may only send tokens to, and receive them from, external wallets of their own already-identified customers, and they must prove technically that the customer controls the wallet, for example with a Satoshi test. The bar is higher for third-party wallets: the institution must identify the third party, establish the beneficial owner, and verify that party's control. The legal basis, Article 10 of the FINMA Anti-Money Laundering Ordinance (AMLO-FINMA), sets no threshold for originator and beneficiary information, and FINMA applies the requirements to unregulated wallets without exception. The authority thus described the Swiss implementation as one of the strictest in the world.

The comparison highlights the gap with the US. Washington has dropped the proposal that would have covered self-hosted counterparties from USD 3,000, so no dedicated recording requirement for such transfers is forthcoming for now. By contrast, the EU requires proof of ownership from EUR 1,000, and Switzerland regardless of amount. FATF Recommendation 16, the international Travel Rule, applies only to VASPs and financial institutions, not to pure P2P transfers — placing Switzerland's limits on self-hosted wallets as the tightest among the three jurisdictions.

On anonymity-enhancing coins, however, the EU has adopted an explicit ban. The Anti-Money Laundering Regulation (AMLR) (EU) 2024/1624 sets out this ban: from July 2027, it prohibits banks, financial institutions, and CASPs from maintaining anonymous accounts and accounts with such coins. Private individuals may nevertheless hold privacy coins such as Monero or Zcash in self-custody after that date.

Treasury keeps tools for future intervention

The withdrawal is not an all-clear. FinCEN plans to keep monitoring mixer activity and reserves the right to take future action. Coin Center nevertheless sees the formal withdrawal as closing the door on both drafts.

The Treasury's March report on the GENIUS Act, the 2025 federal framework for payment stablecoins, already outlines new. It recommends that Congress adopt a dedicated "hold law" for digital assets, referring to liability protection for temporarily freezing suspicious funds. According to the report, such a law would be especially useful against illicit flows involving permitted payment stablecoins. Unlike the withdrawn drafts, a hold law would target individual cases rather than impose blanket reporting requirements. So far, however, it remains only a recommendation to Congress, as do the report's further proposals for a sixth Section 311 special measure and a clarification of which DeFi actors bear AML obligations. Whether Congress takes up these recommendations is the next point to watch in US digital asset AML policy.

For Swiss institutions and European CASPs, the decision in Washington changes nothing: their obligations regarding self-hosted wallets stem from AMLO-FINMA and the TFR.

Source: Crypto Valley Journal