FinCEN Throws Unhosted Wallets & Mixers a Lifeline, Kills Two of Crypto's Most Hated Ghosts 👻

The U.S. Treasury Department's Financial Crimes Enforcement Network has formally withdrawn its long-pending "unhosted wallet" rule and a separate proposal targeting crypto mixers, according to notices filed Monday and slated for Federal Register publication Tuesday. Unhosted, or self-custodial, wallets are controlled directly by users rather than by an exchange or bank. FinCEN's December 2020 proposal, issued in the final days of President Donald Trump's first term, would have required banks and money services businesses to record customers' transactions with such wallets above $3,000 and to report transactions exceeding $10,000, including counterparty information. "FinCEN will take no further action on this NPRM," the agency wrote, using the shorthand for notice of proposed rulemaking.

The second notice scraps an October 2023 Biden-era proposal that would have designated international crypto mixing as a class of transactions of "primary money laundering concern" under the USA PATRIOT Act. Mixing services pool and shuffle coins to obscure their trail. Under the proposal, financial institutions would have been required to report wallet addresses, transaction hashes, and IP addresses tied to suspected mixing. FinCEN said commenters had warned that the rule's expansive definition of mixing could chill legitimate activity, noting it would "take no further action" on the proposal while continuing to monitor mixers for illicit finance.

Both withdrawals cite the White House's July 2025 digital asset report. The mixer notice quotes the report's statement that the administration "supports the ability of lawful users of digital assets to privately transact on a public blockchain." FinCEN said it withdrew the proposals "as part of the Trump Administration's deregulatory agenda and ongoing efforts to ensure digital asset regulations are fit-for-purpose." Separately, the White House proposed Wednesday that Congress consider legislation obligating U.S. taxpayers to report "foreign digital asset accounts," a shift the Trump administration said would "promote the growth and use of digital assets in the United States and alleviate concerns that the lack of a reporting program could disadvantage the United States or U.S. digital asset exchanges."

Coin Center, the Washington crypto policy group that fought both proposals for years, celebrated the news. "It's been a hard month for privacy and your right to use crypto. There's a bright spot," Executive Director Peter Van Valkenburgh wrote on X, while cautioning that "the underlying statutory authority to create new, similar bad rules remains." The Crypto Council for Innovation called the move "positive for the digital asset ecosystem" in a Monday X post. The action is the latest in a series of moves by departments overseeing digital assets, coming the same day Commodity Futures Trading Commission Chair Michael Selig announced the agency would use its "existing statutory authorities" to propose two rules on how crypto companies could operate under its purview without additional authority from Congress.