The U.S. Treasury Department's Financial Crimes Enforcement Network has formally withdrawn two long-pending cryptocurrency rulemakings covering unhosted wallets and so-called "mixing" services, according to AMBCrypto reporting. The withdrawal closes the central reporting docket the bureau began building in late 2020 and that successive administrations kept on the regulatory calendar without finalizing.

What did the proposals cover?

The wallet rule originated in a December 2020 notice of proposed rulemaking that would have required banks and money services businesses to collect counterparty information, verify identities, and file reports on transactions involving unhosted, self-custody wallets above a defined dollar threshold. FinCEN framed the measure as a way to close what it called a "gap" in Travel Rule compliance for transfers touching software-controlled wallets outside of regulated exchanges.

The mixing rule took a different statutory path. FinCEN had begun the process of designating mixers and similar anonymity-enhancing protocols as a class of transactions of "primary money laundering concern" under Section 311 of the USA PATRIOT Act — a designation that, once finalized, would have allowed the agency to impose special measures on financial institutions handling those transactions.

Neither rule advanced to a final form during the Biden administration, even as both remained in the bureau's regulatory agenda through 2024.

Why is FinCEN pulling them now?

The withdrawal tracks a documented policy shift at Treasury under Secretary Scott Bessent following President Trump's January inauguration. Treasury's published financial-crimes priorities concentrate Bank Secrecy Act enforcement on banks, casinos, and federally chartered money services businesses rather than on non-custodial software developers and on-chain protocols.

Industry trade groups that had formally opposed both proposals described the withdrawal as overdue. Coin Center and the Blockchain Association had argued in comment letters and subsequent litigation that the bureau exceeded its statutory authority when it extended customer-identification obligations to wallet software and to non-custodial privacy tools.

What enforcement stays in place?

FinCEN's published priorities continue to apply to virtual asset service providers registered under the Bank Secrecy Act. Anti-money-laundering obligations, including suspicious activity reporting and currency transaction reporting, remain in force for entities that already fall under the bureau's definition of "financial institution."

The withdrawal does not affect the Treasury Office of Foreign Assets Control's separate sanctions designations, including OFAC's 2022 action against Tornado Cash. Those measures remain active and have been the subject of separate appellate litigation that narrowed the legal basis on which immutable smart contracts can be sanctioned.

What changes operationally for crypto firms?

Wallet software developers and protocol maintainers will not face the recordkeeping, verification, and reporting regime that the proposed rules would have imposed. That removes an anticipated compliance overlay that several law firms had estimated could reach six-figure annual costs per product. Decentralized-finance protocols building on Ethereum, Bitcoin, and layer-2 networks can continue operating without filing SARs tied directly to non-custodial wallet activity.

Centralized exchanges, broker-dealers, and mixed-asset treasuries remain fully covered by existing AML obligations, and FinCEN's enforcement actions against non-compliant virtual asset service providers have continued through the first quarter of the year.

What's the forward calendar?

The withdrawal notices will publish in the Federal Register, formally closing the dockets. Treasury is expected to issue updated interpretive guidance clarifying which on-chain actors qualify as "financial institutions" under existing statutes — the definitional question that ultimately determined whether the wallet and mixing proposals applied.

Watch FinCEN and Treasury's Office of the General Counsel for that guidance within the next several months, alongside any successor rule targeting centralized intermediaries where Bank Secrecy Act jurisdiction is uncontested.