The Financial Crimes Enforcement Network, a bureau of the US Treasury Department, formally withdrew two long-pending proposed rules on October 5 that targeted transactions involving self-custodied cryptocurrency wallets and crypto mixing services. The notices are scheduled for publication in the Federal Register on October 6.

Neither proposal had ever taken effect as final regulations. Their removal ends years of uncertainty for banks, money services businesses, and users of personal digital asset wallets.

Details of the Withdrawn Wallet Proposal

The first notice ends a December 2020 proposal that would have imposed new recordkeeping and reporting duties on financial institutions handling convertible virtual currency or digital assets linked to unhosted wallets. Unhosted wallets are those in which users control their own private keys rather than relying on a regulated intermediary.

Under the plan, institutions would have been required to collect and retain customer identity information and transaction details for transfers exceeding $3,000 involving unhosted or certain foreign-hosted wallets. Transfers above $10,000 would have triggered formal reports to FinCEN that included counterparty data.

Critics argued the requirements would have forced regulated firms to gather information on individuals with whom they had no direct relationship, expanding surveillance beyond traditional customer identification rules. The proposal remained unfinished for nearly six years before the formal withdrawal.

Mixing Rule Also Abandoned

Separately, FinCEN withdrew an October 2023 proposed special measure that designated international convertible virtual currency mixing as a class of transactions of primary money-laundering concern under Section 311 of the USA PATRIOT Act.

The definition of mixing was broad. It covered pooling of funds, splitting of transactions, use of single-use wallets, cryptocurrency swaps, introduction of delays, and related techniques. Covered institutions would have faced enhanced obligations to collect and report customer names, birth dates, addresses, email addresses, wallet details, transaction hashes, and other identifying information for activity involving foreign mixing services.

The agency stated it continues to view mixing techniques as tools sometimes used to obscure illicit funds but determined that the proposed measure, as drafted, risked deterring lawful privacy practices and imposing substantial compliance costs.

Policy Context and Ongoing Monitoring

Both withdrawal notices reference the broader policy direction of the current administration. They cite the July 2025 report from the President’s Working Group on Digital Asset Markets, which supported the ability of lawful users to transact privately on public blockchains and recognized that mixing tools can serve legitimate purposes.

FinCEN Deputy Director Jimmy L. Kirby signed the notices. The agency emphasized that existing Bank Secrecy Act requirements, suspicious activity reporting obligations, and sanctions administered by the Office of Foreign Assets Control remain fully in force. It also reserved the right to monitor mixing activity for money-laundering, terrorist-financing, and other illicit-finance risks and to pursue new regulatory steps if warranted in the future.

Because the proposals were withdrawn rather than finalized, any future action would require a fresh rulemaking process rather than revival of the prior dockets.

Reaction from Privacy Advocates

Advocacy groups that had opposed the measures for years described the withdrawals as a significant development for financial privacy. Coin Center, which had repeatedly urged the agency to drop the proposals, characterized the decision as a major win that removes a compliance threat hanging over self-custody and privacy tools.

The organization noted that the unhosted-wallet proposal would have extended bank-like surveillance to personal wallets and that the mixing rule would have treated many common privacy techniques as inherently suspicious. Existing anti-money-laundering frameworks continue to apply, but the two additional layers of proposed reporting are now closed.

The withdrawals close regulatory files that had lingered since 2020 and 2023 without ever becoming binding law, clarifying the compliance environment for institutions and users of self-custodied digital assets.