The Financial Crimes Enforcement Network (FinCEN), an office within the US Treasury Department responsible for safeguarding the financial system from illicit use, has formally withdrawn two proposed regulations targeting cryptocurrency transactions involving mixers and self-custodied wallets. These withdrawals come after extensive public commentary and are scheduled for official publication in the Federal Register on October 6.
Withdrawal of Crypto Mixer Reporting Rule
The first notice reverses FinCEN’s 2023 designation that international crypto mixing services constitute a “class of transactions of primary money laundering concern” under Section 311 of the USA PATRIOT Act. If enacted, this rule would have required banks, crypto exchanges, and other financial institutions to monitor, report, and maintain detailed records on any mixing-linked transactions involving foreign jurisdictions. Institutions would have needed to provide specific details, including wallet and transaction addresses, transaction hashes, IP addresses, and pertinent identity records for participating customers.
FinCEN stated that although it remains concerned about the use of mixing services by criminals seeking to obscure transactions, it reconsidered the rule in light of significant feedback. Commenters warned that the definition of mixing was drawn so broadly it risked suppressing legitimate digital asset activity and imposing unreasonable reporting obligations.
FinCEN emphasized that some responses highlighted the risk of a “chilling effect on legitimate activity and a large reporting burden on covered financial institutions” if the rule were implemented.
Mini dictionary: Crypto mixers are services or protocols designed to improve privacy by obscuring the details of crypto transactions, often by pooling and redistributing assets from multiple users. Regulators have identified these services as potential tools for money laundering, as they can make tracing the source or destination of funds more difficult for investigators.
Retraction of Unhosted Wallet Proposal
FinCEN’s second notice formally withdraws a December 2020 proposal that would have imposed enhanced reporting and record-keeping requirements on financial institutions transacting with “unhosted wallets,” also known as self-custodied wallets. The measure would have compelled banks and money service businesses to report transactions with such wallets exceeding $10,000 within a 24-hour period, and to keep records on any exceeding $3,000.
FinCEN clarified in its official notice, “FinCEN will take no further action on this NPRM.” The measure’s removal had already appeared on Treasury’s regulatory agenda as withdrawn since April 12, 2024, but Monday’s action makes the decision official.
The agency cited that it continues to track the use of mixers for illicit activities and retains the option to take further regulatory steps if warranted in the future.
Ongoing Policy Considerations
Both withdrawals referenced the July 2025 statement from the President’s Working Group on Digital Asset Markets. The mixer notice quoted the position that the Trump Administration supports the right of lawful users to transact privately on public blockchains.
FinCEN Deputy Director Jimmy L. Kirby signed both withdrawal notices, underscoring the agency’s commitment to balancing privacy rights with efforts to mitigate financial crime. Despite rescinding these two proposals, FinCEN confirmed that the illicit use of mixers remains a concern, and future actions may be taken as circumstances evolve.
The bureau reiterated its intent to monitor developments in the crypto sector and adjust its approach as necessary to respond to emerging risks related to digital asset transactions.
