US Treasury withdraws crypto mixer and self-hosted wallet reporting proposals

The U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) has withdrawn two proposed rules: one that would have required banks and money services businesses to report transactions involving self-hosted wallets, and another that would have required financial institutions to report transactions involving crypto mixers (services that pool users' coins to obscure where they came from) outside the United States. The withdrawal notices went on public inspection at the Federal Register on Oct. 5 and were formally published on Oct. 6. The wallet proposal dated to December 2020 and the mixer proposal to October 2023.

Reports on transactions above $10,000

The first proposal, published in the Federal Register on Dec. 23, 2020, would have placed additional obligations on banks and money services businesses (MSBs) when a customer's crypto transaction involved a counterparty using an unhosted wallet, meaning a wallet that is not hosted or managed by a financial institution. For transactions above $10,000, or multiple transactions that added up to more than $10,000 within 24 hours, they would have had to file a report with FinCEN and verify the customer's identity. For transactions above $3,000, they would have had to keep records on the customer and the counterparty. The proposal also covered wallets held at financial institutions that are not subject to the Bank Secrecy Act (BSA) and are located in a foreign jurisdiction identified by FinCEN.

The comment period first closed on Jan. 4, 2021. FinCEN reopened it on Jan. 15, citing additional statutory authority and providing more information on the reporting form, and extended it again on Jan. 28, setting a final deadline of March 29, 2021. No final rule followed. In its withdrawal notice, FinCEN said it "will take no further action on this NPRM."

IP addresses for mixer transactions

The second proposal came on Oct. 23, 2023. It would have designated international crypto mixing as a class of transactions of primary money laundering concern under Section 311 of the USA PATRIOT Act, requiring financial institutions to report transactions they knew or suspected involved mixing. The reports would have included the amount, the type of crypto, the mixer used, customer wallet addresses, transaction hashes, transaction dates and IP addresses. Institutions would also have had to keep records of customers' names, dates of birth, addresses and email addresses.

The definition of mixing was broad. Beyond pooling coins from multiple wallets, it could cover splitting coins and sending them through a series of separate transactions, using single-use addresses, and exchanging coins for other digital assets, as long as the method obscured the source, destination or amount. The comment period closed on Jan. 22, 2024, and the Federal Register records 2,239 comments.

Nearly six years from proposal to withdrawal

1. Dec. 23, 2020Self-hosted wallet reporting proposal published in the Federal Register
2. March 29, 2021Comment period closes after two extensions
3. Oct. 23, 2023International crypto mixing reporting proposal published
4. March 21, 2025Treasury lifts sanctions on mixer Tornado Cash
5. July 2025White House digital asset working group report recommends Treasury consider next steps on the mixer proposal
6. Oct. 5, 2026Withdrawal notices for both proposals go on public inspection; published Oct. 6

FinCEN cited the July 2025 report by the President's Working Group on Digital Asset Markets. The report said "the Trump Administration supports the ability of lawful users of digital assets to privately transact on a public blockchain," and noted that while illicit actors use mixers, lawful users may also use them for financial privacy. FinCEN said it took into account commenters' concerns that the broad definition of mixing could have a chilling effect on legitimate activity and place a large reporting burden on financial institutions.

FinCEN maintained that illicit actors continue to use mixers to hinder law enforcement investigations. It said it will keep monitoring mixer-related activity for signs of money laundering and terrorist financing, and may take appropriate steps in the future. Both notices were signed by FinCEN Deputy Director Jimmy L. Kirby. Earlier, on March 21, 2025, the Treasury lifted economic sanctions on the mixing service Tornado Cash, saying the move followed a review of the novel legal and policy issues raised by using financial sanctions against financial and commercial activity in evolving technology and legal environments.

Bitcoin trades around $85,000

Bitcoin traded at $85,940 on Binance around 7:30 a.m. KST on Oct. 6, down 0.4% over 24 hours. On Upbit's Korean won market it traded at 116.19 million won, putting the kimchi premium (the gap between prices on Korean exchanges and global markets) at about 0.55% based on Upbit. Privacy-focused Zcash (ZEC) fell 0.4% to around $1,343 on Binance at the same time. Zcash is not listed on Upbit's Korean won market.