FinCEN withdraws unhosted-wallet reporting rule and mixer proposal

FinCEN withdrew two crypto proposals on Sunday, ending a pair of rulemakings that had hung over self-custody and privacy tools for years without ever taking effect and leaving unsettled how transfers into self-custody will be treated. The first, proposed in December 2020 during the closing weeks of the first Trump administration, would have required banks and money-services businesses such as crypto exchanges to file reports whenever a customer sent more than $10,000 in crypto to or from an unhosted wallet, the term for a wallet whose owner holds the private keys rather than leaving the assets with an exchange or bank.

Transfers crossing the $10,000 threshold when aggregated over any 24 hours would have been reportable too, and firms would also have had to collect information about the customer and the wallet on the other side of each transfer. Thousands of public comments followed, and the proposal sat unresolved for nearly six years.

FinCEN also withdrew a 2023 proposal that would have classified crypto mixing transactions as a category of primary money-laundering concern, a designation that would have allowed the government to impose additional reporting requirements on financial institutions handling them. The agency said both withdrawals were part of the Trump administration's deregulatory agenda and an effort to make digital-asset rules "fit-for-purpose."

For compliance officers, the change is narrower than the announcement sounds: neither rule was ever in force, so no current reporting practice is being unwound; what the withdrawal removes is a prospective obligation that banks, exchanges, and custody providers would have had to build transaction-monitoring systems around. A reporting rule's cost lands in the systems constructed to satisfy it long before the first filing, and this one spent nearly six years in comment and limbo rather than moving toward an effective date.

The wallet rule's counterparty requirement is the thornier half, since a transfer into a self-hosted wallet has no institution on the far side to supply records. The mixer proposal reached further in a different direction: it keyed additional reporting to the character of a transaction rather than its size, which would have put institutions handling mixing activity under duties unrelated to any dollar threshold.

What the withdrawal does not settle is how transfers into self-custody get treated going forward. The 2020 proposal was a direct attempt to attach federal reporting duties to those transfers, and FinCEN has pulled it without putting a replacement in its place. Whether another agency, or a later FinCEN proposal, picks up the idea is unresolved.