FinCEN withdraws proposed crypto wallet and mixing rules

Crypto users moving funds through self-hosted wallets will not face new steps under two proposed FinCEN rules: the agency withdrew both on Oct. 5. That shelves proposed reporting and identity-check duties for financial firms before they became new requirements. FinCEN said it considered public comments and withdrew the proposals as part of the administration’s deregulatory agenda, according to its announcement of the withdrawals.

Which wallet transfers were covered by the withdrawn proposal?

The first proposal would have added recordkeeping, identity verification and reporting requirements for certain crypto transactions involving unhosted wallets. These are wallets not hosted by a financial institution, such as a self-custody wallet controlled by its owner. The proposal also covered some wallets held at financial institutions in jurisdictions FinCEN identified.

Under the 2020 proposal, banks and money services businesses would have had to keep records and verify customer identity when a transaction with an unhosted or otherwise covered wallet exceeded $3,000. Transactions above $10,000 would have triggered a report to FinCEN within 15 days, according to the U.S. Treasury’s explanation of the proposal. Those thresholds described proposed duties for covered firms, not new fees or reporting steps for wallet owners.

What happens to the proposed crypto-mixing reports?

The second withdrawal ends a separate proposal on convertible virtual currency mixing, a way of handling crypto transactions that can obscure their source, destination or amount. FinCEN proposed the measure in 2023 under Section 311 of the USA PATRIOT Act. It would have required covered financial institutions to report transactions they knew, suspected or had reason to suspect involved mixing within or involving jurisdictions outside the United States, according to FinCEN’s proposal notice.

Neither proposal became a final rule before being withdrawn. For exchanges and other covered firms, the withdrawal means the additional procedures in these proposals will not take effect as proposed; it does not remove separate Bank Secrecy Act duties. The 2020 proposal itself described its requirements as additions to existing obligations.

Do crypto users need to change anything now?

The withdrawals create no new application, wallet setting or transaction step for users. If you use an exchange to send crypto to a self-hosted wallet, these two proposed rules no longer supply a future $3,000 recordkeeping trigger or a $10,000 reporting trigger. Those thresholds belonged to the withdrawn proposal, so they should not be read as new limits on what an individual can transfer.

Check your exchange’s current policies for any identity checks or transfer requirements that already apply to your account. FinCEN’s announcement withdraws these proposals; it does not announce replacement rules or say that all existing crypto compliance requirements have ended.

Source material

• announcement of the withdrawals — fincen.gov
• FinCEN’s proposal notice — fincen.gov