FinCEN has withdrawn two proposals that would have expanded surveillance of self-custodial cryptocurrency wallets and crypto mixing services. The first, a 2020 plan, sought to require financial institutions to collect and report information on transactions involving unhosted wallets. The second, from 2023, aimed to designate crypto mixing as a primary money laundering concern. Both are now off the table, removing potential reporting requirements for users who hold their own keys and for services that obscure transaction trails.
What the 2020 rule would have done
The 2020 proposal would have forced banks and exchanges to verify the identity of customers sending crypto to or receiving it from self-custodial wallets. In practice, that meant more paperwork for every transfer involving a personal wallet — a burden that critics said would have effectively outlawed peer-to-peer transactions. FinCEN never finalized the rule, and its withdrawal closes the book on that effort.
The 2023 mixing designation
The 2023 plan was separate but related. It would have labeled crypto mixing as a "primary money laundering concern" under the USA PATRIOT Act, a move that would have opened the door to special due-diligence requirements for any financial institution touching mixed coins. That designation never took effect either. With its withdrawal, mixers won't face that specific federal scrutiny — at least not through this mechanism.
Why the timing matters
Both withdrawals come as U.S. regulators continue to sort out how existing financial laws apply to crypto. The industry has argued that self-custody and privacy tools are legitimate, and that forcing banks to spy on every wallet transfer would push activity offshore. FinCEN's decision doesn't legalize mixers or unhosted wallets outright, but it removes two looming compliance deadlines that had been hanging over the sector for years.
What's left unresolved
The withdrawals don't stop other agencies from pursuing similar goals through different rules. The Treasury Department could still use sanctions or bank secrecy act powers to target specific mixers. And Congress hasn't passed any law that would settle the question of how private crypto transactions should be treated. For now, though, the two proposals that worried self-custody advocates the most are gone.
