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The Financial Crimes Enforcement Network (FinCEN) pulled back its 2023 proposal against crypto mixing. It claimed the rule would have inadvertently stifled legitimate transactions. It also scrapped a December 2020 proposal that would have forced users to follow strict ID verification and recordkeeping rules for unhosted crypto wallets.
In its press release, it wrote, “FinCEN has considered the comments submitted in response to these proposals and is withdrawing them as part of the Trump Administration’s deregulatory agenda and ongoing efforts to ensure digital asset regulations are fit-for-purpose.”&nbsp;
The withdrawals officially put an end to both rulemaking processes, but because they were never finalized, pulling them off the table leaves current regulatory requirements for financial institutions completely unchanged.&nbsp;
<h3 id="strong-fincen-had-hoped-to-label-foreign-crypto-mixing-a-top-money-laundering-risk-strong">FinCEN had hoped to label foreign crypto mixing a top money laundering risk</h3>
Monday’s filing <a href="https://www.fincen.gov/news/news-releases/fincen-announces-withdrawals-proposed-digital-asset-related-rules" rel="noopener noreferrer nofollow">throws out</a> the proposed rule on mixing, though the agency still believes crypto mixers are being utilized by bad actors. When originally introduced, the agency argued the crackdown was vital to disrupt the illicit financial networks of hostile entities, including terrorist networks like Hamas and Palestinian Islamic Jihad. 
FinCEN Director Andrea Gacki, at the time, also <a href="https://www.fincen.gov/news/news-releases/fincen-proposes-new-regulation-enhance-transparency-convertible-virtual-currency" rel="noopener noreferrer nofollow">emphasized </a>that crypto mixing acts as a lifeline for rogue regimes and hackers, helping them obscure illicit cash flows and bankroll future operations.
The draft rule would have obliged financial firms to log granular data on mixing activities, including wallet addresses, transaction hashes, and IP addresses. 
It also defined “mixing” as any method that obfuscated transaction details—such as the source, recipient, or amount—by merging user funds, fragmenting payments, using disposable addresses, or introducing staggered processing times to prevent tracking. Primarily, the proposed rule would have treated international crypto mixing as a “primary money laundering concern” under the USA PATRIOT Act.&nbsp;
Though that definition invited a lot of industry pushback; the public argued that it would deter legitimate commerce and saddle financial firms with compliance burdens. For instance, more recently, Coin Center, an advocacy group, noted that the proposed definition was “extraordinarily broad,” extending to common methods cryptocurrency users rely on to maintain their privacy. 
It <a href="https://coincenter.org/treasury-just-withdrew-crypto-surveillance-rule-proposals-long-opposed-by-coin-center/" rel="noopener noreferrer nofollow">said</a>, “We argued that risk-averse financial institutions would inevitably report even purely domestic transactions, with potentially severe collateral consequences for innocent users, including account restrictions or closures.”
The community’s concerns primarily contributed to the withdrawal. Nonetheless, the agency said it would keep monitoring <a href="https://www.cryptopolitan.com/crypto-mixers-arent-just-for-criminals/" rel="noopener noreferrer nofollow">CVC mixers</a> for potential illicit financial activity and would respond with further measures.&nbsp;
<h3 id="fincen-wallet-rule-targeted-unhosted-transactions">FinCEN wallet rule targeted unhosted transactions</h3>
Meanwhile, the other rule being scrapped was a December 2020 proposal from the end of Trump’s first term. It basically stipulated that if a transaction topped $3,000 and involved an unhosted wallet or a foreign platform not covered by U.S. banking laws, financial companies would have had to verify identities and track the data. 
Financial firms would also have had to report transactions over $10,000, or several transactions collectively surpassing that amount within 24 hours, to the agency. Coin Center had also contended that the proposed wallet rule would have subjected cryptocurrency transactions to a different standard.&nbsp;
Coin Center’s Executive Director Peter Van Valkenburgh <a href="https://x.com/valkenburgh/status/2107116140463853925?s=20" rel="noopener noreferrer nofollow">posted</a> on X: “The ‘unhosted wallet rule’ that would have made Coinbase and others collect information on people who are holding their own crypto is dead.”&nbsp;
Multiple digital asset advocacy groups have praised FinCEN’s decision to scrap the heavy reporting mandates on unhosted wallets and mixers. The Crypto Council for Innovation welcomed the withdrawals as “positive for the digital asset ecosystem.”&nbsp;
Both withdrawals also draw on the White House’s July 2025 digital asset report, with the mixer notice quoting its support for lawful users’ ability to transact privately on public blockchains.&nbsp;
<h3 id="the-withdrawals-signal-a-lighter-approach-to-crypto-regulation">The withdrawals signal a lighter approach to crypto regulation</h3>
The withdrawals show that the Trump administration appears to be taking a milder approach to crypto regulation. Rather than imposing new reporting requirements that would affect the everyday crypto user, FinCEN seems to be focusing on strict enforcement of transactions and firms involved in the most obvious criminal activity.
As for crypto businesses, the withdrawals could reduce uncertainty about potential compliance obligations that were never finalized. Exchanges and other financial institutions won’t have to prepare for the additional reporting requirements outlined in the two proposals. They will still need to comply with anti-money laundering and know-your-customer requirements, however.
For users, the decision is also significant because unhosted wallets allow individuals to hold and transfer digital assets without relying on a centralized exchange. Privacy advocates have long argued that treating these transactions as inherently suspicious could undermine one of the key features of decentralized cryptocurrencies.
Still, the withdrawals do not mean that FinCEN is abandoning efforts to combat illicit crypto activity. The agency can introduce <a href="https://www.cryptopolitan.com/hackers-double-laundering-crypto-exploits/" rel="noopener noreferrer nofollow">new proposals</a> or enforcement measures if it identifies emerging risks involving mixers, unhosted wallets, or other digital asset services.
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FinCEN scraps proposed crypto mixer and wallet rules

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