The US Treasury has withdrawn two long-pending proposals that would have expanded surveillance of unhosted crypto wallets and mixing services. The move drops rules first floated in 2020 and 2023 that drew thousands of critical public comments, while existing Bank Secrecy Act obligations remain fully in force.
The US Treasury has withdrawn a set of proposed crypto surveillance rules targeting unhosted wallets and crypto mixing services. The move came through the Financial Crimes Enforcement Network, known as FinCEN.
What Treasury pulled back
The centerpiece is a notice of proposed rulemaking first floated in 2020, during the Trump administration. It would have stretched Bank Secrecy Act obligations to cover banks and money services businesses handling transactions with unhosted wallets — wallets where the user holds the private keys rather than an exchange or custodian.
That 2020 proposal set two thresholds. Transactions above $3,000 would have triggered recordkeeping and customer verification requirements, while transactions above $10,000 would have required reporting to the government. Its formal withdrawal is dated April 12, 2024.
A separate proposal targeting crypto mixing services, published in October 2023, was withdrawn as well and had never been finalized. Mixing services pool crypto from many users and shuffle it before sending it back out, making individual transactions harder to trace.
A comment box that overflowed
The 2020 unhosted wallet proposal drew more than 7,500 public comments, most of them critical. Commenters raised concerns about feasibility, cost, and privacy — a bank can verify its own customer, but verifying the anonymous owner of a self-custodied wallet on the other end of a transaction is a different problem entirely.
What changes for the industry
Centralized exchanges and financial institutions that interact with self-custodial wallets are the most immediate beneficiaries, since their compliance burden for those transactions will not expand. Industry advocates welcomed the decision as a reduction in compliance pressure on centralized entities and a boost for decentralized finance.
Existing crypto regulation obligations under the Bank Secrecy Act that already apply to exchanges and other regulated businesses remain fully in force, unchanged by the withdrawal.
Source: Crypto Briefing
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