The U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) announced on October 5 local time that it was withdrawing two proposed rules related to crypto assets. Neither proposal had been finalized or implemented, and the withdrawals ended the processes that would have imposed additional recordkeeping and reporting obligations on financial institutions.
The first was a proposal issued in October 2023 concerning international crypto-asset mixing. Mixing is a transaction method that makes the source, destination, and amount of funds harder to identify. FinCEN withdrew both its determination that international mixing constituted a “class of transactions of primary money laundering concern” under Section 311 of the USA PATRIOT Act and the related proposed rule. The proposal would have required financial institutions to make additional records and reports when they knew or suspected that a mixing transaction occurred outside the United States or involved a foreign jurisdiction.
FinCEN said its decision reflected concerns that defining mixing too broadly could chill legitimate activity and place a substantial reporting burden on financial institutions. The notice also stated the administration's position that lawful users should be able to preserve financial privacy on public blockchains. FinCEN nevertheless said it would continue monitoring mixers for signs of money laundering and terrorist financing and could take future action if necessary.
The second was a proposal issued in December 2020 concerning unhosted wallets. It would have imposed additional obligations on banks and money services businesses (MSBs), including money transmitters and currency exchangers, for crypto-asset transactions sent to or received from unhosted wallets, which users control directly. For relevant transactions exceeding $3,000, institutions would have had to record transaction and counterparty information and verify the identity of their own customer. They also would have had to report to FinCEN any single transaction, or aggregate transactions within 24 hours, exceeding $10,000. FinCEN described the withdrawal as part of the administration's effort to make digital-asset regulation fit for purpose.