The U.S. Financial Crimes Enforcement Network (FinCEN) has formally withdrawn two long-pending rule proposals that would have imposed new reporting obligations on transactions involving self-hosted wallets — cryptocurrency wallets controlled directly by their users rather than held on a regulated platform — and cryptocurrency mixing, ending regulatory initiatives first introduced in 2020 and 2023.

The Treasury bureau announced the withdrawals on October 5, stating that the decisions followed consideration of public comments. FinCEN tied the move to the Trump administration's deregulatory agenda and to an effort to make digital-asset regulation more fit for purpose.

The reversal removes proposed federal reporting requirements at a time when several other jurisdictions are increasing oversight of flows between regulated platforms and user-controlled wallets.

Self-Hosted Wallet Proposal Dropped After Nearly Six Years

The December 2020 proposal would have required banks and money services businesses to collect and retain information on certain transactions involving wallets not hosted by regulated financial institutions. Transactions above $3,000 would have triggered recordkeeping requirements covering both the customer and the counterparty, while transfers exceeding $10,000 would have had to be reported to FinCEN. The original framework also covered wallets hosted by institutions in certain foreign jurisdictions, with Treasury presenting the thresholds as an extension of existing Bank Secrecy Act controls.

The withdrawal eliminates that proposed federal framework before it ever took effect. It does not prevent FinCEN from applying existing anti-money-laundering authorities to financial institutions or to suspicious crypto activity. In practical terms, U.S. institutions remain under the same existing Bank Secrecy Act controls that predated the proposal, rather than taking on new obligations tied to self-custody transactions.

The U.S. move stands in contrast to new controls elsewhere. Thailand recently finalized a Travel Rule requiring licensed crypto businesses to verify the ownership or control of self-hosted wallets when customers transfer assets through regulated platforms. Brazil has gone further on transaction reporting: its new framework requires regulated institutions to report $10,000 self-custody transfers to Coaf when crypto moves between supervised platforms and user-controlled addresses.

FinCEN Abandons Broad Crypto Mixer Proposal

FinCEN also withdrew its October 2023 proposal targeting convertible virtual currency mixing. That initiative identified international crypto mixing as a class of transactions of primary money laundering concern under Section 311 of the USA PATRIOT Act. Covered financial institutions would have been required to report transactions they knew, suspected, or had reason to suspect involved crypto mixing within, or involving, a foreign jurisdiction.

FinCEN originally linked the proposal to the use of mixers by ransomware groups, sanctioned actors, terrorist organizations, and North Korean state-backed hackers. The agency formally classified the rulemaking as withdrawn on October 5.

Coin Center Calls Withdrawal a Privacy Victory

Crypto policy group Coin Center, which opposed both initiatives, described their removal as a significant victory for financial privacy and for Americans' ability to transact directly with cryptocurrency.

The group had argued that the wallet proposal would have collected information about people who were not customers of the reporting institution, while the mixer framework relied on a definition broad enough to potentially capture legitimate privacy-preserving activity.

Regulatory treatment of self-custody remains fragmented internationally. Spain recently excluded user-controlled wallets from its Modelo 721 foreign-asset reporting regime, while Thailand and Brazil are moving toward additional verification or reporting when assets cross between regulated services and private wallets.