Treasury Pulls the Plug on Contentious Crypto Surveillance Rules The U.S. Department of the Treasury and its Financial Crimes Enforcement Network (FinCEN) have formally withdrawn two proposed
The U.S. Department of the Treasury and its Financial Crimes Enforcement Network (FinCEN) have formally withdrawn two proposed rulemakings that had drawn fierce opposition from the crypto industry. The move closes a chapter that dates back to 2020, when regulators first floated rules to extend Bank Secrecy Act obligations to self-custody, or unhosted, digital asset wallets.
The original proposal set two thresholds: transactions above $3,000 would have triggered recordkeeping and customer verification requirements, while transactions above $10,000 would have required automatic reporting to the government.Banks and money services businesses would have needed to collect information on counterparties who, by design, are not their customers.
Crypto advocates called the proposal a dangerous overreach, and after years of contentious debate, its withdrawal was quietly announced in the Federal Register. Critics argued the reporting requirements were technically unworkable, given that self-custody wallets operate outside the traditional banking system.
The withdrawal also covers a separate proposed rule targeting convertible virtual currency (CVC) mixing. Mixing services pool crypto from many users and shuffle it before sending it back out, making individual transactions much harder to trace on a public blockchain.That mixing proposal was a separate notice of proposed rulemaking published in October 2023 and was never finalized after publication.
The most immediate beneficiaries are centralized exchanges and financial institutions that interact with self-custodial wallets, whose compliance burden for those transactions will not expand under these rules.Industry advocates welcomed the decision, describing it as a reduction in compliance pressure on centralized entities and a boost for decentralized finance.
The dual withdrawal does not rewrite existing Bank Secrecy Act rules or eliminate other FinCEN obligations that are already in force. It does, however, remove a long-standing cloud of regulatory uncertainty that has hung over the self-custody segment of the digital asset market for nearly six years.
SourcesCrypto Briefing: US Treasury withdraws proposed crypto surveillance rules on unhosted wallets and mixingCryptoSlate: US FinCEN CVC/LTDA Transaction Reporting NPRM (Withdrawn)Unchained Crypto: U.S. Treasury Withdraws Proposed Reporting Requirements for Unhosted Wallets
