The U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) has withdrawn its 2023 proposed rule designating international crypto mixing as a primary money laundering concern, according to a notice posted to the Federal Register's public inspection site on Monday. The agency said the rule risked "a chilling effect on legitimate activity."

The notice, signed by FinCEN Deputy Director Jimmy L. Kirby, is scheduled for formal publication on Tuesday. A second notice posted the same day withdraws a December 2020 proposal that would have required banks and money services businesses to verify the identities of users transacting through self-hosted wallets.

The dual withdrawals end both rulemakings outright. Because neither proposal was finalized, financial institutions' existing obligations under the Bank Secrecy Act remain unchanged.

What did the 2023 mixing rule propose?

The October 2023 proposal found that international convertible virtual currency mixing constitutes "a class of transactions of primary money laundering concern" under Section 311 of the USA PATRIOT Act — the first time that provision had ever been applied to an entire class of transactions.

The attached rule would have required banks and other covered institutions to file reports on mixing transactions with granular detail:

• Wallet addresses
• Transaction hashes
• IP addresses

The proposal defined "mixing" broadly: facilitating transactions in a way that obscures their source, destination or amount, including pooling funds, splitting transactions, using single-use wallets, or allowing user-initiated timing delays that prevent deposits and withdrawals from being matched.

FinCEN said commenters warned that "the expansive definition of CVC mixing" could chill legitimate activity and "place a large reporting burden on covered financial institutions." The agency added that it still believes illicit actors use mixers to hinder law enforcement investigations.

Coinbase pushed back in a January 2024 comment letter, arguing that the absence of a dollar threshold would force bulk reporting of non-suspicious transactions.

What happens to the self-hosted wallet rule?

The second withdrawal kills a proposal the first Trump administration issued weeks before leaving office in December 2020. It would have imposed verification and recordkeeping requirements when a counterparty used an unhosted wallet, or a wallet at a non-Bank Secrecy Act institution in a jurisdiction FinCEN identified, for transactions above $3,000. Transactions above $10,000, or several totaling more than $10,000 within 24 hours, would have been reported to FinCEN.

FinCEN said the withdrawal forms part of the Trump administration's "ongoing efforts to ensure digital asset regulations are fit-for-purpose" and that it "will not take any further action" on the proposal.

Coin Center, the advocacy group that fought both rules, said in a Monday blog post that the mixing definition was "extraordinarily broad, sweeping in common techniques used by ordinary cryptocurrency users to preserve their privacy." The group said the wallet rule "would have created a double standard for cryptocurrency transactions."

How does this fit Treasury's shifting stance on mixers?

The withdrawals continue a marked shift in Treasury's posture. The department removed the Ethereum-based mixer Tornado Cash from its sanctions list in March 2025, after an appeals court ruled the Office of Foreign Assets Control had exceeded its authority. In a March report to Congress required by the GENIUS Act, Treasury acknowledged that mixers have legitimate privacy uses and asked lawmakers for a "hold law" allowing financial institutions to temporarily freeze suspicious digital assets.

Monday's notices also cite the July 2025 report from the President's Working Group on Digital Asset Markets, which noted that "lawful users of digital assets may leverage mixers to enable financial privacy when transacting through public blockchains" and recommended Treasury reconsider the mixing proposal.

Treasury declined to comment on the record.

FinCEN said it "will continue to monitor activity involving CVC mixers" for signs of illicit finance and may take future action — leaving the door open to a narrower rulemaking as Congress weighs the hold-law proposal.