Treasury Scraps Proposed Rules on Unhosted Crypto Wallets and Mixers
The U.S. Treasury Department has withdrawn two significant proposed rules that would have imposed new reporting requirements on transactions involving unhosted cryptocurrency wallets and convertible virtual currency mixing services. The decision, announced by the Financial Crimes Enforcement Network (FinCEN), signals a shift in the regulatory approach to digital assets and resolves years of industry uncertainty.
The first proposal, initially introduced in December 2020, aimed to require banks and money services businesses to maintain records for certain transactions involving unhosted wallets exceeding $3,000 and to report those surpassing $10,000. It also mandated that financial institutions gather and verify customer and counterparty information for specific transactions with private wallets.
A separate proposal, put forth in 2023 under Section 311 of the USA PATRIOT Act, sought to designate transactions involving convertible virtual currency (CVC) mixers as a primary money laundering concern. This would have compelled financial institutions to collect and report data related to transactions utilizing these privacy-enhancing services.
FinCEN stated that the withdrawals align with the administration’s objective to develop digital asset regulations that are “fit-for-purpose.” The move has been welcomed by cryptocurrency industry groups that had voiced strong opposition to the proposed measures. The Digital Chamber, for instance, indicated that the withdrawal alleviates regulatory pressure concerning self-custodial wallets.
With these proposals rescinded, the crypto industry is no longer subject to the two frameworks, while existing anti-money laundering (AML) and financial regulations remain in effect. The withdrawn rules would have imposed additional obligations on regulated financial institutions when customers transferred cryptocurrency to private wallets. The Treasury’s decision means there is no new federal mandate compelling banks or exchanges to identify the owner of a self-hosted wallet solely based on a customer sending funds to it.
