FinCEN has withdrawn two proposed rules affecting crypto companies, including one on “convertible virtual currency mixing,” after weighing public feedback and deciding the proposals could chill legal activity and place heavy burdens on regulated firms.
The US Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Monday notice saying it would pull a December 2020 proposal that would have imposed “recordkeeping, verification, and reporting requirements” related to crypto transactions and unhosted wallets. It also pulled a second proposal affecting enforcement of crypto mixing services, which was initially proposed in October 2023.
“FinCEN has considered the comments submitted in response to these proposals and is withdrawing them as part of the Trump Administration’s deregulatory agenda and ongoing efforts to ensure digital asset regulations are fit-for-purpose.”
What the Withdrawn Rules Would Have Done
The December 2020 proposal targeted unhosted wallets. The October 2023 proposal focused on crypto mixers.
FinCEN cited comments in its decision to withdraw the rules.
Why FinCEN Changed Course
FinCEN’s notice cited specific concerns about the mixer rule:
- It “could have a chilling effect on legitimate activity.”
- It “place[s] a large reporting burden on covered financial institutions.”
The agency framed the withdrawal as part of a broader push toward deregulation under the Trump administration.
Industry Reaction
Advocacy groups for the crypto and blockchain industry welcomed the move. The Crypto Council for Innovation posted a Monday message calling the withdrawal “positive for the digital asset ecosystem.”
Related Moves From Other Agencies
The FinCEN withdrawal is part of a larger pattern of regulatory action around crypto assets. Earlier on the same day, Commodity Futures Trading Commission Chair Michael Selig announced that the agency was using its “existing statutory authorities” to propose two rules on how crypto companies could operate under its purview without additional authority from Congress.
The Broader Context
FinCEN’s move follows a series of actions by departments tasked with overseeing crypto assets, all citing the Trump administration’s crypto agenda. A separate story covers advocacy from industry groups pushing back on banks’ legal challenges against the OCC over charters.
What Happens Next
The withdrawal removes pending requirements from crypto companies. The recordkeeping, verification, and reporting obligations that would have applied to unhosted wallets and mixing services are now off the table.
For regulated firms, the withdrawal removes pending requirements. The notice reflects the agency’s stated reasons for the move.
The withdrawal is a win for crypto firms that feared the new rules. It is also a signal to the industry that the current administration is willing to reconsider regulatory approaches that could harm legitimate business.
Source material: “FinCEN withdraws proposed crypto mixing rule over ‘legitimate activity’ concerns,” Cointelegraph.
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