FinCEN Hits "Delete" on Wallet & Mixer Reporting Rules 🚮

The U.S. Treasury Department has withdrawn two long-pending proposed surveillance rules that would have expanded reporting requirements for unhosted crypto wallets and crypto mixers, according to separate notices issued by the Financial Crimes Enforcement Network (FinCEN). The agency said the moves are part of the Trump Administration's "ongoing efforts to ensure digital asset regulations are fit-for-purpose." The withdrawn proposals were first advanced in 2020 during President Donald Trump's first term and had been carried over through subsequent administrations without being finalized. FinCEN has not indicated whether replacement rules will be proposed.

The first withdrawn proposal would have required banks and money services businesses to collect and report personal information on customers conducting cryptocurrency transactions involving unhosted wallets above certain thresholds. Under the rule, institutions would have been required to file reports on transactions exceeding $3,000 and to keep records on transactions exceeding $10,000, and to report the counterparty's name and physical address along with the type of virtual currency and the time of transaction. The proposed rule, formally titled "Requirements for Certain Transactions Involving Convertible Virtual Currency or Digital Assets," was published in the Federal Register on January 7, 2021, in the final days of the previous administration.

The second withdrawn proposal would have designated international cryptocurrency mixing as a class of transactions "of primary money laundering concern" and imposed similar recordkeeping and reporting obligations on financial institutions handling mixer-related transfers. FinCEN said in its notice that it is "withdrawing this proposed rule in light of the Treasury Department's broader review of its regulations and the changing landscape of digital asset innovation." Crypto industry groups had argued that both rules were technically unworkable and would push transactions offshore.

The withdrawals come as the Treasury Department and other U.S. regulators work to overhaul digital asset policy under the current administration, with officials signaling a preference for narrower, framework-based rules over the broad surveillance proposals left over from the Biden and first Trump administrations. FinCEN has not yet specified whether it will reopen either rulemaking with revised language or abandon the underlying reporting requirements entirely. The withdrawals do not affect existing Bank Secrecy Act obligations for fiat on-ramps and exchanges handling $BTC, $ETH, and other convertible virtual currencies.