The Treasury Department's Financial Crimes Enforcement Network (FinCEN) formally withdrew two long-pending surveillance proposals targeting self-custodial crypto wallets and mixing services. Notices detailing the withdrawals were filed Monday and are set for publication Tuesday in the Federal Register.
One proposal, issued in December 2020 during President Donald Trump's first term, would have imposed Bank Secrecy Act requirements on transactions with unhosted, or self-custodial, wallets. It mandated banks and money services businesses keep records on transactions above $3,000 and report those exceeding $10,000, including counterparty details. FinCEN stated it will take no further action on this notice of proposed rulemaking. The agency had faced significant industry pushback on the practical implementation and privacy implications of extending traditional financial regulations to personal digital asset holdings.
The second withdrawn proposal, a 2023 measure from the Biden administration, aimed to designate international crypto mixing as a transaction class of "primary money laundering concern" under the USA PATRIOT Act. This designation would have compelled financial institutions to report wallet addresses, transaction hashes and IP addresses linked to suspected mixing activities. Commenters warned FinCEN that its expansive definition could hinder legitimate activity. FinCEN acknowledged these concerns while noting it will continue to monitor mixers for illicit finance and may pursue future actions if necessary.
Both withdrawals directly referenced the White House's July 2025 digital asset report. The notice for the mixer proposal specifically quoted the report's position that the administration "supports the ability of lawful users of digital assets to privately transact on a public blockchain." This statement provided a key policy justification for the regulatory rollback.
Coin Center, a Washington-based crypto policy advocacy group, actively opposed both proposals for several years. Peter Van Valkenburgh, Coin Center's Executive Director, said the withdrawals represent a positive development but cautioned that "the underlying statutory authority to create new, similar bad rules remains."
The withdrawals arrive as other regulatory bodies consider oversight of self-custody solutions. In early 2024, the Consumer Financial Protection Bureau floated an interpretive rule that would have brought self-custodial wallets like MetaMask under consumer payment law, a move that also drew pushback from industry participants.
