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FollowingFinCEN formally withdraws two proposed regulatory rules on cryptocurrency mixers and self-custodial wallets
The Financial Crimes Enforcement Network (FinCEN), a unit of the U.S. Treasury Department, which protects the financial system from illegal activities, has formally withdrawn two proposed regulations aimed at regulating transactions involving cryptocurrency mixers and self-custodial wallets. The withdrawal was made after extensive public comment collection and is scheduled to be officially published in the Federal Register on October 6.
Withdraws reporting rules on crypto hybrids
The first notice revokes FinCEN's 2023 determination that international crypto hybrid services constitute "a type of transaction of primary money laundering concern" under Section 311 of the American Patriot Act. If the rule takes effect, banks, cryptocurrency exchanges and other financial institutions will be required to monitor, report and retain detailed records of any mixed-related transactions involving foreign jurisdictions. Institutions are required to provide specific details, including wallet address, transaction address, transaction hash value, IP address, and identity records of participating customers.
FinCEN said that although it remained concerned about criminals using mixed-currency services to cover up transactions, it reconsidered the rule in view of the large number of feedback received. Commentators have warned that the definition of a hybrid currency is too broad and may discourage legitimate digital asset activity and impose unreasonable reporting obligations.
FinCEN highlighted that some responses pointed out that if implemented, the rule could have a "chilling effect" on legal activities and place a huge reporting burden on regulated financial institutions.
Noun Explanation: Crypto-mixers
Crypto-mixers are services or protocols designed to improve privacy by obscuring transaction details, usually by bringing together and redistributing assets from multiple users. Regulators believe these services may be money laundering tools because they make it more difficult for investigators to trace the source or destination of funds.
Withdraw proposal on unmanaged wallets
FinCEN's second notice formally withdraws a December 2020 proposal that had required enhanced reporting and record-keeping requirements among financial institutions that traded with "unmanaged wallets"(also known as self-custodial wallets). The measure would force banks and money services companies to report transactions exceeding $10,000 within 24 hours and keep records of any transactions exceeding $3,000.
FinCEN clarified in its official notice: "FinCEN will not take further action on this proposed rulemaking notice (NPRM)." The removal of the measure had been on the Treasury Department's regulatory agenda as early as April 12, 2024, marked as withdrawn, but Monday's action gave the decision formal effect.
The agency quoted it as saying it continues to monitor the use of currency mixers for illegal activities and reserves the option to take further regulatory steps if necessary in the future.
Continuing policy considerations
Both withdrawals referred to a statement issued by the President's Digital Asset Markets Working Group in July 2025. The notice on money mixers cited the Trump administration's position that supports the right of legitimate users to conduct private transactions on public blockchains.
Jimmy L., Deputy Director of FinCEN Kirby signed the two withdrawal notices, emphasizing the agency's commitment to balancing privacy rights with efforts to combat financial crime. Despite withdrawing both proposals, FinCEN confirmed that illegal use of currency mixers remains a concern and that action may be taken in the future as the situation develops.
The bureau reiterated its intention to monitor developments in the cryptocurrency space and adjust methods as needed to address emerging risks associated with digital asset trading.
