FinCEN Withdraws Its Crypto Mixing and Self-Hosted Wallet Proposals

The Financial Crimes Enforcement Network is withdrawing two proposed rules that would have reshaped how banks and money services businesses handle certain crypto transactions. In two notices posted to the Federal Register's public inspection site on Monday, October 5, FinCEN withdrew its 2023 proposal targeting crypto mixing and its 2020 proposal on self-hosted wallets.

The mixing notice, signed by FinCEN Deputy Director Jimmy L. Kirby, was scheduled for formal publication on Tuesday.

The withdrawals end both rulemakings. Because neither proposal was ever finalized, they do not change financial institutions' existing obligations.

The mixing notice withdraws FinCEN's October 2023 finding that international convertible virtual currency mixing is "a class of transactions of primary money laundering concern" under Section 311 of the USA PATRIOT Act. The proposed rule attached to that finding is withdrawn with it.

The legal route was unusual. Section 311 had never been used against a class of transactions before FinCEN proposed this rule.

The reach of the proposal was broad. Banks and other covered institutions would have been required to file reports on mixing transactions with details down to wallet addresses, transaction hashes, and IP addresses.

The definition of "mixing" was just as wide. The proposal covered facilitating transactions in a way that obscures their source, destination, or amount. That included pooling funds, splitting transactions, using single-use wallets, and allowing user-initiated delays so that deposits and withdrawals cannot be matched by timing.

Coin Center, the crypto advocacy group that fought both proposals, said in a blog post on Monday that the mixing definition was "extraordinarily broad, sweeping in common techniques used by ordinary cryptocurrency users to preserve their privacy."

Coinbase had raised a separate objection in a January 2024 comment letter. It argued that because the proposed rule had no dollar threshold, it would have meant bulk reporting of transactions that were not suspicious.

FinCEN said the withdrawal was informed by commenters' concerns. They argued that "the expansive definition of CVC mixing" could chill legitimate activity and "place a large reporting burden on covered financial institutions."

The agency also cited the July 2025 report of the President's Working Group on Digital Asset Markets. That report stated that "lawful users of digital assets may leverage mixers to enable financial privacy when transacting through public blockchains," and it recommended that Treasury consider next steps on the mixing proposal.

That citation stands out. In a formal withdrawal notice, FinCEN relied on a report that describes financial privacy on public blockchains as a lawful reason to use mixers.

The second notice withdraws a December 2020 proposal that the first Trump administration put out weeks before leaving office.

That proposal would have required banks and money services businesses to verify customers' identities and keep records in certain cases. The trigger was a transaction above $3,000 where the counterparty used an unhosted wallet, or a wallet at a non-Bank Secrecy Act institution in a foreign jurisdiction identified by FinCEN.

Larger transactions would have gone further. Anything above $10,000, or several transactions totaling more than $10,000 within 24 hours, would have been reported to FinCEN.

FinCEN said the withdrawal is part of the Trump administration's "ongoing efforts to ensure digital asset regulations are fit-for-purpose." It cited the same July 2025 report and stated that it "will not take any further action" on the proposal.

Coin Center said the wallet rule "would have created a double standard for cryptocurrency transactions."

The two withdrawals are not worded the same way, and the difference is worth reading closely.

On the wallet rule, FinCEN's language is categorical: no further action.

The mixing notice is more guarded. FinCEN said it still believes illicit actors use mixers to hinder law enforcement investigations. It said it "will continue to monitor activity involving CVC mixers" for signs of illicit finance, and that it may take steps in the future to address it.

The 2023 rule is gone. The agency's concern about mixers, by its own account, is not.

The withdrawals follow earlier moves on the same subject. Treasury removed Tornado Cash, an Ethereum-based mixer, from its sanctions list in March 2025. That came after an appeals court ruled that the Office of Foreign Assets Control had exceeded its authority.

This March, a Treasury report to Congress required by the GENIUS Act said mixers have legitimate privacy uses. The same report asked lawmakers for a "hold law," which would let financial institutions temporarily freeze suspicious digital assets.

Read side by side, the two approaches differ in kind. The withdrawn proposals would have required reporting across broad categories of transactions. The hold law Treasury has requested would let institutions temporarily freeze specific suspicious assets.

Treasury declined to comment on the record.