The US Treasury Department has officially withdrawn two proposed regulations aimed at increasing surveillance in the cryptocurrency sector, marking a significant shift in federal oversight and drawing praise from digital asset industry advocates.
FinCEN withdrawals and industry response
On Monday, the Financial Crimes Enforcement Network (FinCEN) filed notices to end both the 2020 “unhosted wallet” rule and a separate 2023 proposal targeting international crypto mixing services. These withdrawals are scheduled for publication in the Federal Register on Tuesday.
Privacy advocates and crypto organizations quickly welcomed the reversal. Coin Center, a leading Washington-based policy group for digital assets, described the move as a “significant victory for financial privacy.”
The definition of mixing outlined in the proposals cast an exceptionally wide net, capturing routine privacy techniques used by average cryptocurrency holders. Coin Center indicated that, since FinCEN struggled to define where such transactions occurred, cautious financial institutions would likely report even domestic activity, which could inadvertently impact innocent users through account freezes or closures.
Had the “unhosted wallet” rule been enacted, it would have required banks and other financial entities to report crypto transactions above $3,000 and $10,000 when clients kept assets in wallets not hosted on exchange platforms.
Implications of the mixing proposal
The plan targeting crypto mixing services was set to affect a broad range of activity. It characterized mixing as any action that hid the source, destination, or value of a crypto transaction. This included pooled funding, splitting transfers, use of single-use wallets, and even asset swaps. FinCEN received comments warning that such a broad definition might harm legitimate users and overwhelm institutions with regulatory filings.
Under these proposed changes, financial entities would have needed to report a wide array of sensitive information, including wallet addresses, transaction hashes, IP addresses, and details identifying customers.
Market observers note that closely tracking both asset movements and investor behavior in real time remains critical, especially in rapidly evolving sectors like meme tokens. In this context, a recent trade involving the token “Niu Lai” demonstrated how an initial $99 investment turned into approximately $370,000, illustrating the dramatic swings seen in the meme token market. Fomo App highlights this dynamic by integrating token discovery and trading features, alongside social feeds, investor rankings, and trade notifications, allowing users to track not only price swings but also trends in timing and token selection.
White House stance and ongoing scrutiny
The Treasury’s decision closely follows guidance from the President’s Working Group on Digital Asset Markets. In a July 2025 report, the group wrote that the Trump Administration favors allowing lawful users of digital assets to transact privately on public blockchains and recommended that the Treasury reevaluate its approach to these regulations.
While the report recognized that certain criminal actors use mixers to conceal illicit activity, it also noted that these tools play a role in protecting the privacy of legitimate users.
Although FinCEN is withdrawing these proposals, the agency stated it will continue monitoring for money laundering and terrorist financing in the cryptocurrency sector and may take further action if necessary.
