The U.S. Treasury Department has withdrawn a proposed rule that would have required financial institutions to collect and report customer information on cryptocurrency transfers exceeding $10,000 sent to private, self-hosted wallets.

The rule, originally issued by the Treasury's Financial Crimes Enforcement Network (FinCEN) in December 2020 under the Bank Secrecy Act, would have applied to banks, money services businesses, and other reporting entities handling convertible virtual currency. Under the proposal, financial institutions would have been required to record counterparty details for any outbound transfer to an unhosted or otherwise non-custodial wallet above the $10,000 threshold.

What did the rule propose?

FinCEN's December 2020 notice of proposed rulemaking sought to extend traditional bank reporting obligations to crypto-asset transactions, capturing both transfers to self-hosted wallets and lowering existing currency transaction reporting thresholds for digital-asset activity. Reporting entities would have been required to collect identifying information on recipients of large outbound transfers and file reports with FinCEN.

The proposal emerged as FinCEN and the Treasury Department worked to apply longstanding anti-money-laundering controls to the rapidly expanding cryptocurrency market, an effort that accelerated following the 2020 release of the department's National Money Laundering Risk Assessment.

Why was it scrapped?

The rule generated sustained opposition from cryptocurrency exchanges, wallet developers, and civil-liberties organizations, which argued the requirements would push users toward offshore platforms while doing little to improve illicit-finance detection.

The proposed rulemaking attracted tens of thousands of public comment letters during its comment period and was delayed multiple times before its formal withdrawal. Critics described it as one of the most expansive U.S. surveillance proposals applied to digital-asset transactions.

What changes for the industry?

For U.S.-based crypto exchanges, brokerages, and money services businesses, the withdrawal removes a multi-year compliance overhang. Reporting infrastructure that firms built or staged in anticipation of the rule can now be retired, and enhanced recordkeeping procedures tied specifically to self-hosted wallet transfers will not take effect.

For individual users, transfers from U.S. exchanges to private wallets remain subject to the Bank Secrecy Act's existing anti-money-laundering obligations, including transaction monitoring and suspicious-activity reporting. The withdrawal does not alter those baseline requirements.

What's next on crypto reporting?

Treasury's decision comes amid a broader reorientation of U.S. digital-asset policy. Separate rulemaking and legislative efforts — from the administration's pending crypto market-structure framework to provisions under consideration in Congress — are expected to address digital-asset reporting obligations through different channels. The future of any enhanced counterparty-reporting requirement for private-wallet transfers now depends on whether Congress chooses to include such provisions in forthcoming market-structure legislation.