US Treasury Withdraws Proposed Crypto Wallet and Mixing Rules
The Treasury Department has withdrawn two controversial crypto surveillance proposals, including the "unhosted wallet" rule and a plan to label international crypto mixing as a money laundering concern. This decision is a significant win for financial privacy advocates and the digital asset industry, though FinCEN stated it will continue to monitor illicit activities.
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN)has withdrawn two long-pending proposals that would have expanded reporting and recordkeeping requirements for cryptocurrency transactions. The agency announced on October 5, 2026, that it was withdrawing a 2020 proposal involving unhosted or self-custodied wallets and a 2023 proposal targeting cryptocurrency mixing, with the notices published in the Federal Register on October 6.
The wallet proposal would have required financial institutions to keep records for certain transactions above $3,000 and report transactions above $10,000 involving unhosted or otherwise covered wallets. The 2023 mixing proposal sought to designate international convertible virtual currency mixing as a class of transactions of primary money-laundering concern and require covered financial institutions to report transactions they knew, suspected, or had reason to believe involved mixing.
FinCEN’s original definition covered activity intended to obscure the source, destination or amount of a transaction, while critics including Coin Center argued that its breadth could capture legitimate privacy-preserving activity and impose significant compliance burdens on financial institutions. FinCEN itself acknowledged concerns from commenters that the proposal could have a “chilling effect on legitimate activity”, while the agency’s original proposal had cited the use of mixers by criminals and other illicit actors to conceal funds.
The withdrawals align with the Trump administration’s broader deregulatory approach to digital assets, with FinCEN saying the proposals were being withdrawn as part of efforts to ensure crypto regulations are fit for purpose. The decision does not amount to unrestricted approval of cryptocurrency mixers or other privacy tools, as FinCEN continues to identify their use by illicit actors as a money-laundering and law-enforcement concern.
For the crypto industry and privacy advocates, however, the withdrawal removes two proposed regulatory frameworks that had faced years of debate over the balance between financial surveillance, privacy, and anti-money-laundering enforcement.