FinCEN withdraws proposed crypto mixing rule over ‘legitimate activity’ concerns

The bureau under the US Treasury said it was withdrawing two proposed rules on unhosted wallets and crypto mixers ”as part of the Trump Administration’s deregulatory agenda.” The US Treasury’s Financial Crimes Enforcement Network (FinCEN) withdrew two proposed rules affecting its enforcement of crypto companies, including one on “convertible virtual currency mixing.” According to a Monday notice, the agency will >withdraw a December 2020 proposal that would have imposed “recordkeeping, verification, and reporting requirements” related to crypto transactions and unhosted wallets, as well as one affecting enforcement of crypto mixing services. FinCEN >said that the mixer rule, initially proposed in October 2023, “could have a chilling effect on legitimate activity and place a large reporting burden on covered financial institutions.” “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,” the Monday notice said. The US agency’s regulatory action is the latest in a series of moves by departments tasked with overseeing crypto assets, citing the Trump administration’s crypto agenda. Earlier today, 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. Many advocacy groups for the crypto and blockchain industry lauded FinCEN for reversing course on crypto mixers and reporting requirements related to unhosted wallets. In a Monday X post, the Crypto Council for Innovation called the move “positive for the digital asset ecosystem.” Related: Advocacy group pushes back on banks’ lawsuit against OCC over charters