FinCEN withdraws crypto mixing and self-hosted wallet proposals

FinCEN has withdrawn its 2023 proposal to designate international crypto mixing as a “primary money laundering concern” under Section 311 of the USA PATRIOT Act, along with a 2020 proposal targeting transactions involving self-hosted wallets. The agency’s notices are documented in The Block’s report on the withdrawals.

FinCEN said commenters warned that the mixing proposal’s broad scope could create “a chilling effect on legitimate activity.” The agency also cited concerns that the definition would impose a large reporting burden on covered institutions.

Both proposals are now withdrawn. Measured against the two FinCEN proposals identified in the record, that is 2 out of 2, or 100%, removed without finalization.

The decision also draws a line between the current administration’s approach and the stance reflected in the 2020 wallet proposal, which was issued weeks before the first Trump administration left office. FinCEN’s notice says the withdrawals are part of the Trump Administration’s “deregulatory agenda and ongoing efforts to ensure digital asset regulations are fit-for-purpose,” according to Cointelegraph’s account of the notice.

The 2020 proposal would have required banks and money services businesses to verify customers’ identities and retain records when a counterparty used an unhosted wallet for a transaction above $3,000. Transactions above $10,000, or multiple transactions totaling more than $10,000 within 24 hours, would have been reported to FinCEN.

That reporting framework is gone as a proposal. The practical result for financial institutions is narrower than a repeal of an existing obligation: because neither rule was finalized, the withdrawals do not change institutions’ current requirements. They do remove the prospect that those specific reporting and recordkeeping duties would be imposed through the two notices.

The 2023 mixing proposal reached beyond dedicated privacy services. It defined “mixing” as facilitating transactions in a way that obscures their source, destination or amount. The definition included pooling funds, splitting transactions, using single-use wallets and allowing user-initiated delays.

That breadth was the central objection. Coin Center described the proposal as “extraordinarily broad, sweeping in common techniques used by ordinary cryptocurrency users to preserve their privacy.” The group also argued that it “would have created a double standard for cryptocurrency transactions.”

FinCEN’s withdrawal does not amount to a decision to stop watching mixers. The agency said it “will continue to monitor activity involving CVC mixers.” That leaves a live enforcement and policy question for protocols and users that rely on transaction privacy: the two proposals are finished, but the agency has not abandoned scrutiny of the activity.

The White House’s July 2025 digital asset report supplied the policy reference point for both withdrawals. The mixing notice quoted the report’s position that the administration “supports the ability of lawful users of digital assets to privately transact on a public blockchain.” The President’s Working Group on Digital Asset Markets similarly stated that “lawful users of digital assets may leverage mixers to enable financial privacy when transacting through public blockchains,” as reported by Decrypt.

That language marks a shift from treating privacy-preserving transaction methods primarily through a surveillance and reporting lens. For DeFi protocols and self-custody products, the immediate consequence is the removal of two proposed federal requirements that could have changed how users moved funds between hosted services and personal wallets.

Peter Van Valkenburgh, Coin Center’s executive director, wrote on X: “It’s been a hard month for privacy and your right to use crypto. There’s a bright spot.” He also warned that “the underlying statutory authority to create new, similar bad rules remains.”

That caveat matters for positions built around privacy infrastructure. They do not bind FinCEN against drafting another rule later, and the agency’s own notice preserves its monitoring posture toward CVC mixers.