Summary
- FinCEN has rescinded its 2020 proposal on "unhosted wallets," which mandated banks and money service providers to track self-custody wallet transactions exceeding $3,000 and report those over $10,000.
- The agency has also withdrawn a 2023 initiative that aimed to classify international crypto mixing as a "primary money laundering concern," citing fears of stifling legitimate activities.
- Coin Center welcomed this development but cautioned that the Treasury retains the authority to propose similar regulations in the future.
Two controversial surveillance proposals within the cryptocurrency space have been officially withdrawn.
The Financial Crimes Enforcement Network (FinCEN), part of the U.S. Treasury Department, has canceled its longstanding "unhosted wallet" regulation alongside a proposal aimed at crypto mixers, as detailed in notices submitted on Monday, with publication set for Tuesday in the Federal Register.
Unhosted wallets, or self-custodial wallets, are managed directly by individuals rather than through a financial institution. The proposal from December 2020, introduced during the final days of President Donald Trump's administration, would have mandated financial institutions to maintain records of transactions with these wallets exceeding $3,000 and report those surpassing $10,000, including details about the counterparties involved. As noted by Decrypt, this initiative effectively sought to extend Bank Secrecy Act regulations to personal wallets.
FinCEN stated, "FinCEN will take no further action on this NPRM," referring to the notice of proposed rulemaking.
It’s been a challenging month for privacy rights in crypto usage, but there’s a silver lining.
Two rules from the Treasury, which Coin Center has strongly opposed for years, have been officially withdrawn.
The "unhosted wallet rule" that would have imposed significant burdens on users…
— Peter Van Valkenburgh (@valkenburgh) October 5, 2026
The second notice eliminates a Biden administration proposal from 2023 that aimed to categorize international crypto mixing as a type of transaction posing a "primary money laundering concern" under the USA PATRIOT Act.
Mixing services work by pooling and mixing coins to conceal their transaction histories. The earlier proposal would have mandated financial institutions to disclose wallet addresses, transaction hashes, and IP addresses connected to suspected mixing activities, as stated in the notice. At the time, the initiative aimed to label mixers as a national security threat.
FinCEN acknowledged that feedback received indicated the broad definition of mixing might impede legitimate activities. The agency confirmed it will continue to monitor mixers for potential illicit financing and could take future actions.
Both withdrawals reference the digital asset report issued by the White House in July 2025. The notice regarding mixers quotes the report's assertion that the administration "supports the ability of lawful users of digital assets to privately transact on a public blockchain."
Coin Center, the Washington-based cryptocurrency policy organization that has campaigned against both proposals for years, expressed relief at the news. "It’s been a difficult month for privacy and your right to use crypto, but there’s a bright spot," said Executive Director Peter Van Valkenburgh on X. However, he warned that "the underlying statutory authority to create new, similar unfavorable regulations remains intact."
This is not the only ongoing battle regarding self-custody. Earlier last year, the Consumer Financial Protection Bureau considered an interpretive rule that would have subjected wallets like MetaMask to consumer payment regulations, prompting backlash from industry representatives.