FinCEN Withdraws Crypto Mixing and Unhosted Wallet Rules

The US Treasury's Financial Crimes Enforcement Network (FinCEN) formally withdrew two long-pending proposed rules targeting the crypto industry, including a controversial measure that would have imposed recordkeeping and reporting requirements on cryptocurrency mixing services. In a Monday notice, FinCEN said the October 2023 mixer rule "could have a chilling effect on legitimate activity and place a large reporting burden on covered financial institutions," prompting the agency to scrap the proposal entirely.

The withdrawal also covers a December 2020 proposal addressing transactions involving unhosted wallets, which would have required financial institutions to collect detailed information on counterparties in certain crypto transfers. FinCEN stated that the decision reflects "the Trump Administration's deregulatory agenda and ongoing efforts to ensure digital asset regulations are fit-for-purpose." The move marks one of the most significant rollbacks of proposed crypto oversight in the United States to date.

Industry advocacy groups quickly praised the decision. The Crypto Council for Innovation called it "positive for the digital asset ecosystem" in a Monday post on X, joining other organizations that had previously raised concerns about the regulatory burden such rules would impose on crypto companies and their users. The withdrawal aligns FinCEN with a broader shift in US digital asset policy under the current administration.

Separately on Monday, Commodity Futures Trading Commission (CFTC) Chair Michael Selig announced that the agency would use its "existing statutory authorities" to propose two new rules governing how crypto companies operate under its jurisdiction, without requiring additional authority from Congress. The twin developments signal an accelerated federal effort to reshape the regulatory landscape for digital assets in the United States.