The U.S. Treasury Department is scrapping two cryptocurrency surveillance proposals that had faced years of industry and privacy advocacy opposition.
The Financial Crimes Enforcement Network filed notices Monday withdrawing its 2020 "unhosted wallet" rule and a 2023 proposal to designate international crypto mixing as a "class of transactions of primary money laundering concern." Both notices are set to appear in the Federal Register on Tuesday.
The Wallet Rule
The unhosted wallet proposal would have required banks and other financial institutions to report certain cryptocurrency transactions above $3,000 and $10,000 when customers held assets in self-custodied wallets. Financial institutions would have been required to provide wallet addresses, transaction hashes, IP addresses, and customer identity details.
The Mixing Proposal
The mixing proposal cast a broader net, defining mixing as anything that obscured the source, destination, or amount of a cryptocurrency transaction. The definition encompassed pooled funds, split transfers, single-use wallets, and asset swaps.
FinCEN acknowledged in its withdrawal notice that commenters warned the definition "could have a chilling effect on legitimate activity" and would impose significant compliance burdens on financial institutions.
Policy Shift
The reversal aligns with a July 2025 report from the President's Working Group on Digital Asset Markets, which stated that the Trump Administration supports the ability of lawful users to privately transact on public blockchains and urged the Treasury to reconsider the wallet rule. The report acknowledged that while criminals use mixers for money laundering, lawful users rely on them for financial privacy.
FinCEN stated it will continue monitoring for money laundering and terrorist financing and may take action in the future.
