Two proposed measures are withdrawn

The Financial Crimes Enforcement Network has withdrawn proposals covering certain transactions involving self-custody wallets and convertible virtual currency mixing.

FinCEN announced the decision on October 5. The formal withdrawal of the wallet proposal was published with an October 6 effective date, closing a rulemaking process that began in December 2020.

What the wallet proposal would have done

The wallet proposal would have required banks and money-services businesses to report, keep records and verify customer information for certain transactions involving unhosted or otherwise covered wallets.

An unhosted wallet is commonly described as a self-custody wallet because the user controls it without requiring a financial institution to conduct transactions from it. The proposal focused on obligations for financial intermediaries handling covered transfers.

The distinction between proposed and existing rules

These measures were proposals. Withdrawing them is therefore different from repealing an already operating reporting regime or ending every anti-money-laundering requirement that applies to crypto businesses.

FinCEN said it had considered public comments and linked the withdrawals to the administration’s deregulatory programme and its effort to make digital-asset regulation fit for purpose.

The separate mixer proposal also concerned additional requirements tied to a category of activity. Its withdrawal should not be interpreted as a declaration that any transaction involving a mixer is automatically lawful.

A clearer outcome for a long-running debate

For businesses planning compliance systems, a proposal that remains unresolved for years can create uncertainty about future requirements. A formal withdrawal settles the status of that particular rulemaking.

For self-custody users, the change removes a proposed additional reporting framework around covered transfers. It does not remove the need to distinguish wallet ownership, the intermediary involved and the purpose of a transaction.

The immediate outcome is narrower and clearer than a blanket claim of deregulation: these two proposed measures are no longer moving forward.