FinCEN drops proposed rules on unhosted wallets and mixers

Two of the most contested crypto proposals of recent years are off the table. Treasury's Financial Crimes Enforcement Network has withdrawn both, Crypto Briefing reported October 5.

The older one dates from 2020. It would have required banks and money services businesses to verify and report transactions with self-custodied wallets above set thresholds. The second, from October 2023, targeted crypto mixing services, which pool funds from many users to obscure where they came from.

The 2020 proposal ran into a practical wall. It drew more than 7,500 critical comments on cost, feasibility and privacy. Institutions said they could not verify the owner of a wallet that has no intermediary behind it, because there is no company to ask. That objection carried.

For people who hold their own keys, the withdrawal removes a long-standing prospect: that moving coins to or from a personal wallet would trigger identity checks and reports. It does not create a free zone. Existing Bank Secrecy Act duties on exchanges and other regulated businesses are unchanged, so the checks at the points where crypto meets the regulated financial system continue as before.

What comes next is open. Treasury could leave the area alone, or it could return with narrower measures aimed at specific illicit-finance risks.