The Trump administration has formally withdrawn a cryptocurrency reporting proposal originally introduced by Treasury Secretary Steven Mnuchin in December 2020. The rule would have required banks and crypto exchanges to collect additional information about transactions involving wallets controlled by individuals outside regulated financial institutions.
The proposal emerged amid national security concerns cited by regulators, including money laundering, terrorism financing, and sanctions evasion. Treasury pointed to transactions involving wallets associated with North Korea's Lazarus Group as an example of gaps in existing financial oversight.
How the Proposed Rule Would Have Worked
Under the December 2020 proposal, regulated financial institutions would have been required to report transactions exceeding $10,000 involving unhosted wallets—those where owners control their own private keys. Transactions above $3,000 would have triggered recordkeeping requirements, including collecting the name and physical address of the counterparty to the transaction.
The rule would not have required people to register privately controlled wallets with the government or prohibited self-custody of cryptocurrency. Instead, it would have made regulated businesses responsible for collecting information whenever transactions passed between their services and wallets outside their control.
The Core Regulatory Challenge
The proposal highlighted a fundamental difference between traditional banking and blockchain systems. Banks maintain customer identities and transaction records. Crypto exchanges do the same for their users, but once assets move to privately controlled wallets, institutions lose oversight. Public blockchains record transaction details and amounts but do not inherently identify wallet owners.
Privacy advocates objected to requiring financial institutions to collect personal information about all counterparties in transactions above a certain threshold, particularly when those counterparties were not customers of the institution and had not agreed to provide such information.
A Prolonged Regulatory Process
Treasury initially gave the public just 15 days to comment on the proposal, with the comment period spanning Christmas and New Year's. FinCEN, the Treasury bureau responsible for financial-crime reporting, received more than 7,500 comments and reopened the consultation.
The rule never became law. After President Joe Biden took office, the agency extended the process multiple times. The proposal remained in regulatory limbo throughout Biden's presidency and was officially listed as withdrawn on April 12, 2024, more than two years before FinCEN published the formal withdrawal notice in October.
The Final Reversal
Trump's second administration formally closed the proceeding, reflecting a policy weighing financial privacy more heavily while maintaining existing efforts to combat illicit activity. The withdrawal represents an unusual reversal in which both the original proposal and its cancellation came from administrations led by the same president.
The debate over how much financial visibility regulators should require when cryptocurrency transactions involve privately controlled wallets remains unresolved by the withdrawal of the rule. Public blockchains make transactions visible, financial institutions make customers identifiable, and regulators continue to navigate how much information should connect those two systems.
