The Treasury Department is withdrawing two long-stalled crypto surveillance proposals. FinCEN filed notices on Monday to pull the 2020 "unhosted wallet" rule and a 2023 plan to label international crypto mixing as a "class of transactions of primary money laundering concern." The withdrawal notices are set to be published in the Federal Register on Tuesday.
The two rules that are going away
The unhosted wallet rule would have forced banks and other financial institutions to report certain crypto transactions above $3,000 and $10,000 when customers held the assets in unhosted wallets. That proposal had been sitting in limbo for years, drawing thousands of comments and fierce pushback from the industry.
The mixing proposal was written more broadly. It defined mixing as anything that obscured the source, destination, or amount of a crypto transaction. That included pooled funds, split transfers, single-use wallets, and swaps between assets. Under the proposals, institutions would have had to report wallet addresses, transaction hashes, IP addresses, and customer identity details.
What FinCEN said about the reversal
FinCEN acknowledged that commenters warned the mixing definition "could have a chilling effect on legitimate activity" and would create excessive paperwork for institutions. That language went into the withdrawal notice, which is unusual for an agency that spent years defending the rule. The proposal had been a priority for the previous Treasury leadership, but it never made it to a final rule.
In a statement tied to the withdrawal, the agency also warned that illicit actors "continue to use mixers and other tools and methods to hinder law enforcement investigations." It said it will keep monitoring for money laundering and terrorist financing and may act in the future. That caveat matters: the withdrawal is not a promise to stay out of the space forever.
Coin Center cheers, citing financial privacy
Coin Center, a Washington-based crypto policy group, called the withdrawal "a significant victory for financial privacy." The group has been one of the loudest critics of the unhosted wallet rule since it was first proposed in 2020, arguing that it would have pushed users away from regulated platforms and into the shadows.
The White House angle
The reversal aligns with White House policy. A July 2025 report from the President's Working Group on Digital Asset Markets stated that "the Trump Administration supports the ability of lawful users of digital assets to privately transact on a public blockchain" and urged Treasury to reconsider the rule. That report gave the agencies political cover to drop the proposals without a fight.
What comes next
The notices will hit the Federal Register on Tuesday. Once published, the rules are formally withdrawn and the comment periods that never closed are effectively dead. FinCEN's statement leaves the door open to future rulemaking, but for now, banks and crypto businesses won't have to build reporting systems for unhosted wallets or track mixer transactions under these definitions. The agency has not set a timeline for any replacement proposal.
