FinCEN Scraps Proposed Rules on Self-Custody Wallets and Crypto Mixers
The Financial Crimes Enforcement Network (FinCEN) on Monday rescinded two proposed rules, one concerning self-custody cryptocurrency wallets and another targeting crypto mixers.
In its decision, the Treasury bureau cited the Trump administration’s “deregulatory agenda” as the reason for ending the proposed rule on wallets, which had been pending since December 2020.
The first withdrawn rule, published on December 23, 2020, aimed to regulate what it termed “unhosted wallets”—those where users manage their own transactions without the involvement of a bank or other financial institution. Under the proposal, banks and money service businesses would have been required to file reports and verify customer identities when a counterparty used such a wallet for a transfer exceeding $10,000, or if multiple transfers summed to over $10,000 within a 24-hour period. Record-keeping requirements would have commenced at $3,000, and the rule also encompassed wallets held at foreign institutions outside the purview of the Bank Secrecy Act, in jurisdictions specified by the agency.
The second proposal, originating in 2023, sought to impose special measures on crypto mixing services. These services blend coins from multiple users, making it more difficult to trace their origins. The proposal was based on a finding under section 311 of the USA PATRIOT Act, which identified international crypto mixing as a class of transactions of primary concern for money laundering. Had it been enacted, the rule would have mandated that covered financial institutions report any transaction they knew or suspected involved mixing with a foreign link. This would have included details such as amounts, wallet addresses, transaction hashes, and IP addresses, along with maintaining records of each customer’s full identity.
Deputy Director Jimmy L. Kirby signed the notice for the wallet rule withdrawal, stating the bureau would take no further action and referencing a July 2025 White House report from the President’s Working Group on Digital Asset Markets. FinCEN indicated it had considered public comments submitted on both proposals before deciding to withdraw them.
The Crypto Council for Innovation (CCI), an industry group that had submitted comments on the mixing proposal, described both withdrawals as “positive for the digital asset ecosystem” in a post on X. The CCI had previously warned that the proposal’s broad definition of mixing could inadvertently encompass legitimate activities and characterized the outcome as “the rulemaking process working.” Regarding the wallet rule, the CCI argued that its withdrawal would help prevent regulators from prohibiting or restricting the use of self-hosted wallets.
These decisions come at a time when privacy-focused crypto services are facing increased legal scrutiny. For instance, Samourai Wallet co-founders Keonne Rodriguez and William Lonergan Hill have agreed to plead guilty in connection with their mixing service. Prosecutors allege the wallet processed over $2 billion in illicit transactions and laundered more than $100 million. The founders’ legal team had sought dismissal of charges following an April 2025 Justice Department memo suggesting prosecutors would no longer pursue cases based solely on user actions or regulatory technicalities. They also alleged that officials withheld internal FinCEN communications that indicated Samourai was not considered a money transmitter.
Rodriguez and Hill were subsequently sentenced to five and four years in prison, respectively. During Rodriguez’s sentencing, the judge remarked that he had “used his talent to enable fraud.” Supporters, including analyst Kyle Chasse, maintain that the platform was designed to facilitate anonymous cryptocurrency transfers rather than to conceal illicit activities.
