FinCEN Withdraws Proposed Self-Hosted Wallet and Crypto-Mixing Rules

FinCEN has formally withdrawn two proposed digital-asset rules, ending an unresolved 2020 effort aimed at certain transactions involving unhosted wallets and a 2023 proposal targeting international crypto mixing. The withdrawals were published in the Federal Register on October 6, after the agency announced them on October 5 as part of the Trump administration’s deregulatory agenda and an effort to make digital-asset rules “fit for purpose.”

The immediate consequence is that FinCEN will not proceed with either proposal in its existing form. The agency said it would take no further action on the wallet proposal, while maintaining that it will continue to watch mixers for signs of illicit finance.

FinCEN formally ends the self-hosted wallet proposal

In a Federal Register notice, FinCEN withdrew its proposed requirements for reporting, recordkeeping and customer-identity verification involving certain transactions in convertible virtual currency or digital assets held in unhosted wallets.

The proposal originated in 2020 and had remained unresolved. FinCEN’s withdrawal notice states that the bureau will take no further action on it.

Mixer special measure withdrawn

FinCEN also withdrew its 2023 finding and proposed special measure that would have treated international convertible virtual currency mixing as a class of transactions of primary money-laundering concern, according to a separate Federal Register filing.

That proposal drew comments warning that its broad definition of mixing could chill legitimate activity and create a substantial reporting burden for covered financial institutions. FinCEN cited those concerns in withdrawing the proposed measure and the associated finding.

Deregulatory rationale, continued monitoring

FinCEN’s October 5 announcement framed both withdrawals as part of the Trump administration’s deregulatory agenda and efforts to make digital-asset regulations fit for purpose.

Comments had warned that the mixing proposal’s broad definition could chill legitimate activity and impose a substantial reporting burden on covered financial institutions. FinCEN cited those concerns in withdrawing the proposal and its associated finding.

The bureau said it will continue monitoring mixers for illicit-finance indicators despite the withdrawal, preserving that enforcement focus without advancing the proposed reporting regime.

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