FinCEN withdrew a 2020 proposal that would have forced banks and crypto exchanges to record and report transfers involving personal, or unhosted, wallets. The bureau also scrapped a separate 2023 plan that would have required firms to report suspected crypto mixing with a foreign link. The withdrawal of the 2020 proposal takes effect when it hits the Federal Register on October 6.
What the old rule would have done
Under the 2020 proposal, firms would have verified customers and kept records for transfers involving unhosted wallets above $3,000. Transfers above $10,000, or multiple transfers totaling that amount in 24 hours, would have triggered a report to FinCEN. That's a lot of paperwork for ordinary self-custody users, and the industry spent years arguing it was unworkable.
The 2023 mixing plan drew similar pushback. FinCEN said commenters warned its definition of mixing could chill legitimate activity. The bureau acknowledged that point in its withdrawal notice, but added that illicit actors still use mixers and it may act in the future.
Why FinCEN says it's backing off
The bureau pointed to a July 2025 White House crypto report and said the withdrawal is meant to keep digital asset rules 'fit-for-purpose.' The report included a line FinCEN quoted directly: 'The Trump Administration supports the ability of lawful users of digital assets to privately transact on a public blockchain.'
That's the policy mood in Washington right now. Privacy tools and self-hosted wallets are getting friendlier treatment than they did during the previous administration, and FinCEN is moving in step.
What didn't change
Existing duties stay in place. Suspicious activity reports still have to be filed. Sanctions screening still applies. And every Bitcoin transfer still lands on a public ledger, where wallet payments can be traced. The withdrawal doesn't make on-chain activity anonymous — it just removes a reporting layer aimed at unhosted wallets.
That distinction matters. The proposal was never about stopping blockchain analysis; it was about forcing exchanges and banks to collect identity data on the other side of a transfer. FinCEN is dropping that requirement, not the underlying surveillance regime.
The Tornado Cash case is still moving
Developer Roman Storm faces a Tornado Cash retrial in April 2027 over the Ethereum-based mixing service. That case is separate from the FinCEN rulemaking, but it's the same fight over privacy tools and criminal liability. The regulatory retreat doesn't touch the courtroom.
FinCEN's withdrawal notice leaves the door open for future action on mixers. The bureau said it may revisit the issue, which means the policy isn't fully settled — it's just paused. For now, the immediate effect is concrete: as of October 6, the unhosted wallet reporting requirements are gone from the books.
