FinCEN Withdraws Proposed Rules on Unhosted Wallets and Crypto Mixing

The Financial Crimes Enforcement Network (FinCEN) has officially withdrawn two proposed regulatory measures that aimed to place reporting and recordkeeping burdens on digital asset transactions, the bureau announced on Oct. 5 ¹. The move removes prospective compliance mandates surrounding convertible virtual currencies, self-hosted wallets, and transaction mixing services ¹.

Specifically, the agency rescinded a proposal that would have required financial institutions to verify customer identities, keep records, and file reports on transactions involving unhosted wallets and convertible virtual currencies ¹. Alongside that measure, FinCEN scrapped a separate initiative to enact a special measure against crypto mixing transactions, which had previously sought to designate mixing services as a class of transactions of primary money laundering concern ¹.

Alignment With Deregulatory Policy

FinCEN stated that its decision followed an evaluation of public comments submitted in response to the initial rulemakings ¹. The bureau cited the Trump Administration's broader deregulatory agenda and an effort to craft digital asset oversight that is fit-for-purpose as the primary catalysts for the withdrawals ¹. The policy shift marks a departure from stricter compliance frameworks, which also intersected with broader sanctions-monitoring initiatives seen in actions like the US Treasury's targeting of foreign financial networks.

By shelving both rulemakings, the Treasury department halts regulatory expansions that drew industry pushback over user privacy and transaction surveillance. At the time of writing, $BTC traded at $85,799 while $ETH stood at $2,713. FinCEN did not outline replacement frameworks or immediate next steps in its announcement ¹.