US Treasury Abandons Crypto Surveillance Plans in Shock Reversal

The Treasury Department has announced the withdrawal of two significant crypto surveillance proposals, marking a notable victory for privacy advocates and the digital asset industry. The Financial Crimes Enforcement Network (FinCEN) officially filed notices on Monday to rescind its 2020 “unhosted wallet” rule and a 2023 plan that sought to label international crypto mixing as a “class of transactions of primary money laundering concern.” These notices are scheduled for publication in the Federal Register on Tuesday.

Coin Center, a Washington-based crypto policy group, lauded the decision as “a significant victory for financial privacy.” The organization had strongly argued against the mixing proposal, noting its extraordinarily broad definition that encompassed common techniques used by ordinary cryptocurrency users for privacy preservation. They warned that the difficulty in determining the origin of mixing transactions would compel risk-averse financial institutions to report even domestic transactions, potentially leading to severe consequences for innocent users, such as account restrictions or closures.

The withdrawn “unhosted wallet” rule would have mandated banks and other financial institutions to report certain cryptocurrency transactions exceeding $3,000 and $10,000, particularly when customers held these assets in unhosted wallets. The mixing proposal cast an even wider net, defining mixing as any action that obscured the source, destination, or amount of a crypto transaction. This expansive definition would have included pooled funds, split transfers, single-use wallets, and even swaps between different digital assets.

FinCEN acknowledged that commenters had expressed concerns that the broad definition of mixing “could have a chilling effect on legitimate activity” and would burden institutions with excessive paperwork. The proposed requirements would have compelled institutions to provide sensitive data, including wallet addresses, transaction hashes, IP addresses, and customer identity details.

This reversal aligns with broader White House policy, as indicated by a July 2025 report from the President’s Working Group on Digital Asset Markets. This report stated that “the Trump Administration supports the ability of lawful users of digital assets to privately transact on a public blockchain,” and specifically urged the Treasury to re-evaluate the rule. While acknowledging the use of mixers by criminals for money laundering, the report also highlighted their legitimate use by lawful individuals for financial privacy.

Despite the withdrawal of these specific proposals, FinCEN clarified that it is not giving mixers an unrestricted pass. The agency reiterated that illicit actors “continue to use mixers and other tools and methods to hinder law enforcement investigations.” FinCEN affirmed its ongoing commitment to monitoring for money laundering and terrorist financing activities and indicated that it might take future actions as deemed necessary.