Treasury withdraws crypto self-custodial wallet and mixer surveillance proposals

The Treasury Department's Financial Crimes Enforcement Network (FinCEN) withdrew its long-pending proposal on unhosted wallets and a separate proposal targeting international crypto mixing. Notices filed Monday are scheduled for publication in the Federal Register on Tuesday. Both withdrawals cite the White House's July 2025 digital asset report. The mixer notice quotes the report's statement that the administration supports lawful digital asset users' ability to transact privately on a public blockchain.

Unhosted wallets, also called self-custodial wallets, are controlled directly by users rather than an exchange or bank. FinCEN released the wallet proposal in December 2020, during the final weeks of President Donald Trump's first term. The proposal would have required banks and money services businesses to keep records on customers' transactions with such wallets above $3,000. The proposal would have required reports on transactions above $10,000, including counterparty information. The plan effectively extended Bank Secrecy Act rules to personal wallets. FinCEN said it will take no further action on the notice of proposed rulemaking.

The second withdrawal scraps a 2023 Biden-era proposal to designate international crypto mixing as a class of transactions of "primary money laundering concern" under the USA PATRIOT Act. Mixing services pool and shuffle coins to obscure transaction trails. According to the notice, the proposal would have required financial institutions to report wallet addresses, transaction hashes and IP addresses tied to suspected mixing. The proposal sought to classify mixers as a national security threat. FinCEN said commenters warned that the proposal's expansive definition of mixing could discourage legitimate activity. FinCEN said it will continue monitoring mixers for illicit finance and may take steps in the future.

Coin Center, a Washington crypto policy group that fought both proposals for years, welcomed the withdrawals. Coin Center Executive Director Peter Van Valkenburgh described the withdrawals as positive news during a difficult month for privacy and the right to use crypto. However, Van Valkenburgh warned that the underlying statutory authority to create similar rules remains.

The Consumer Financial Protection Bureau floated an interpretive rule early last year that would have brought wallets such as MetaMask under consumer payment law. Industry stakeholders opposed that proposal.