FinCEN Withdraws Crypto Mixing and Self-Hosted Wallet Rules

The U.S. Treasury Department has abandoned two proposed crypto surveillance rules after years of industry opposition. FinCEN withdrew its 2023 crypto mixing proposal and a separate 2020 rule covering self-hosted wallets.

Significantly, regulators acknowledged concerns that broad requirements could discourage legitimate cryptocurrency activity and impose heavy compliance costs. Neither proposal became final, so the withdrawals leave existing obligations for financial institutions unchanged.

FinCEN Drops Broad Mixing Proposal

The 2023 proposal sought extensive reporting requirements for transactions involving cryptocurrency mixing services. Financial institutions could have reported information including wallet addresses, transaction hashes, and internet addresses.

Industry participants disagreed, however, that FinCEN’s definition of mixing was too broad. Proposed framework could have included common privacy techniques.

Consequently, FinCEN decided against moving forward while maintaining concerns about criminal misuse. The agency plans to continue watching mixing activity for potential illicit financing.

The decision also reflects Washington’s changing approach toward financial privacy. A 2025 presidential working group report recognized legitimate privacy reasons for using mixers.

Self-Hosted Wallet Rules Also Scrapped

In addition, FinCEN cancelled its 2020 proposal on transactions with self-hosted wallets. The plan included recordkeeping and identity checks for some transactions of over $3,000.

Moreover, higher transfers could have resulted in further reporting requirements. Those rules were harsh on the average cryptocurrency investor, critics said. Both withdrawals, therefore, suggest a shift in the regulatory approach from broad transactional surveillance to focused enforcement.

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