Treasury has pulled back two major crypto surveillance proposals, scrapping rules that would have forced banks to track self-custody wallet transactions and treat international coin mixing as a money-laundering threat. The moves came in notices filed Monday and published Tuesday in the Federal Register.
FinCEN, the Treasury Department’s enforcement arm, withdrew both proposals. One targeted “unhosted wallets,” or self-custodial wallets held directly by users rather than by an exchange or bank. The other would have labeled international crypto mixing a “primary money laundering concern.” Both notices cite the White House’s July 2025 digital asset report.
What The Unhosted Wallet Proposal Would Have Done
The December 2020 proposal, issued in the final weeks of President Donald Trump’s first term, would have required banks and money services businesses to keep records on customers’ transactions with unhosted wallets above $3,000. Transactions topping $10,000 would have been reported, including counterparty information.
FinCEN wrote that it “will take no further action on this NPRM,” using the shorthand for a notice of proposed rulemaking. The withdrawal ends a fight that lasted years.
Why The Mixer Proposal Fell
The 2023 proposal took aim at mixing services, which pool and shuffle coins to obscure their trail. Under the plan, financial institutions would have had to report wallet addresses, transaction hashes, and IP addresses tied to suspected mixing.
Commenters warned that the rule’s expansive definition of mixing could chill legitimate activity. FinCEN agreed. The notice scraps the proposal, though FinCEN added that it will keep monitoring mixers for illicit finance and may take steps in the future.
Coin Center Celebrates
Coin Center, the Washington crypto policy group that fought both proposals for years, celebrated the news. Executive Director Peter Van Valkenburgh wrote on X that “It’s been a hard month for privacy and your right to use crypto. There’s a bright spot.”
Van Valkenburgh tempered the victory with a warning. “The underlying statutory authority to create new, similar bad rules remains,” he cautioned.
The July 2025 Digital Asset Report
Both withdrawals cite the White House’s July 2025 digital asset report. That report includes a statement that the administration “supports the ability of lawful users of digital assets to privately transact on a public blockchain.”
The report appears to have shifted the balance at Treasury. The withdrawal notices reference it directly as the reason for pulling back.
A Quiet Month For Privacy
Van Valkenburgh noted that the month had been hard for privacy and crypto users. The withdrawal offers a bright spot, but it is not the end of the road. Treasury still holds the legal authority to propose similar restrictions.
What This Means For Users
The withdrawal means banks and money services businesses will not have to keep records on unhosted wallet transactions above $3,000 or report those above $10,000. Mixing services can continue operating without the reporting burdens the proposal would have placed on them.
The move shows that advocacy groups like Coin Center can win these fights when they make their case directly to regulators.
The CFPB Angle
In early last year, the Consumer Financial Protection Bureau floated an interpretive rule that would have brought wallets like MetaMask under consumer payment law. That drew pushback from industry stakeholders.
The MetaMask proposal is separate from the FinCEN moves, but it fits into the same pattern of regulatory pressure on crypto tools.
What Comes Next
FinCEN said it will keep monitoring mixers for illicit finance and may take steps in the future. The agency has not said what form those steps might take.
The withdrawal does not eliminate the underlying money-laundering concerns. It simply removes the specific reporting requirements that were being proposed.
Where the paper stands
The paper backs Treasury’s withdrawal of the unhosted wallet and coin-mixing proposals and is against any surveillance rules that raise the cost of entry for small crypto businesses. The pullbacks stop banks from having to track self-custody wallet transactions and stop treating international coin mixing as a money-laundering threat.
These proposals would have put reporting burdens on banks and money services businesses, forcing them to keep records on transactions with unhosted wallets above $3,000 and report those above $10,000, including counterparty information. They would have also required reporting wallet addresses, transaction hashes, and IP addresses tied to suspected mixing. The paper opposes rules that do that, because they raise the cost of entry for small crypto businesses and protect the biggest players instead.
The July 2025 digital asset report, which cites support for “the ability of lawful users of digital assets to privately transact on a public blockchain,” appears to have shifted the balance at Treasury. The withdrawal notices reference it directly as the reason for pulling back. But Van Valkenburgh is right to warn that the underlying statutory authority to create new, similar bad rules remains. Treasury can still act on that authority, and the paper will watch for it.
Key Facts Box
- Unhosted wallet proposal: Withdrawn by FinCEN Monday, published Tuesday in the Federal Register
- Mixer proposal: Withdrawn by FinCEN Monday, published Tuesday in the Federal Register
- December 2020 proposal: Issued in final weeks of Trump’s first term
- July 2025 digital asset report: Basis for both withdrawals
- MetaMask proposal: Floated by CFPB in early last year
The withdrawal is a win for crypto users who want to hold their own keys and move their funds privately. It is also a reminder that regulatory pressure is not gone. The statutory authority that Van Valkenburgh warned about still exists.
For now, the bright spot stands. Users can breathe easier on this front.
Source material: “Treasury Kills Crypto 'Unhosted Wallet' and Mixer Surveillance Rules,” Decrypt.
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