TLDR
- FinCEN has officially withdrawn a 2023 proposal that would have designated crypto mixing as a primary money laundering threat.
- A separate 2020 proposal requiring identity verification for self-custody wallet transactions has also been pulled.
- The agency acknowledged that the mixing proposal’s sweeping definition risked penalizing ordinary users seeking transaction privacy.
- Since neither rule was ever enacted, existing regulations for financial institutions remain in effect.
- Industry advocacy organizations, such as Coin Center, praised the withdrawal decisions.
The Financial Crimes Enforcement Network, a division of the US Treasury commonly known as FinCEN, has officially retracted two cryptocurrency regulatory proposals. The federal agency disclosed this decision through a formal notice published in the Federal Register this Monday.
The first proposal, initially unveiled in October 2023, sought to classify international cryptocurrency mixing services as a “primary money laundering concern.” The second, originating from December 2020, would have mandated financial institutions to verify user identities associated with self-custody wallet transactions.
FinCEN attributed this rollback to the Trump Administration’s broader deregulatory initiative. The agency emphasized its commitment to ensuring that digital asset regulations are appropriately tailored to their intended purpose.
Reasons Behind the Mixing Proposal Withdrawal
The 2023 regulatory proposal employed an expansive definition of mixing activities. It encompassed fund pooling, transaction fragmentation, and the deployment of single-use wallets designed to mask the origin or destination of cryptocurrency transactions.
Under the proposed framework, financial institutions would have been obligated to report wallet addresses, transaction identifiers, and IP address data for such activities. FinCEN acknowledged that public feedback highlighted the overly expansive nature of this definition.
The agency recognized that implementing this rule would have imposed substantial reporting obligations. Additionally, FinCEN conceded the regulation might have deterred legitimate users from employing mixers for lawful privacy protection unrelated to criminal activity.
FinCEN referenced a July 2025 analysis from the President’s Working Group on Digital Asset Markets. That assessment concluded that law-abiding individuals may utilize mixing services to maintain financial privacy on transparent blockchain networks.
Nevertheless, FinCEN maintained that certain malicious actors do exploit mixers to evade law enforcement detection. The agency confirmed it will continue monitoring mixer usage for indicators of illicit behavior.
The Self-Custody Wallet Proposal
The second retracted regulation originated in December 2020. It was introduced during the closing days of the first Trump presidency.
Under that proposal, financial institutions would have been required to conduct identity verification for wallet transactions exceeding $3,000. Transactions surpassing $10,000 would have triggered mandatory reporting to FinCEN.
FinCEN stated this proposal is being abandoned as part of its comprehensive review of digital asset regulatory frameworks. The agency confirmed it will pursue no further action on this matter.
Importantly, neither proposal advanced beyond the proposal stage. Consequently, existing compliance requirements for banks and cryptocurrency businesses remain unaffected at this time.
Coin Center, a prominent cryptocurrency policy advocacy organization, addressed the announcement in a detailed blog response. The organization argued the mixing rule’s definition was excessively broad and could have impacted standard privacy measures employed by ordinary cryptocurrency holders.
Coin Center further contended the wallet verification rule would have established discriminatory treatment for cryptocurrency transactions relative to traditional financial activities.
The Crypto Council for Innovation issued its own statement. The industry group shared on X that the withdrawal represents a favorable development for the digital asset sector.
This announcement follows other recent shifts in regulatory policy. Treasury removed the cryptocurrency mixing service Tornado Cash from its sanctions roster in March 2025 following an adverse court decision against the Office of Foreign Assets Control.
A separate Treasury Department report submitted to Congress this past March recognized that mixing services can fulfill legitimate privacy objectives. Treasury officials declined to provide additional commentary when contacted by media representatives.
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