US Treasury Scraps Two Crypto Surveillance Plans

The U.S. Treasury Department is abandoning two long-pending cryptocurrency oversight proposals, a move that represents a major win for privacy advocates and the digital asset sector.

On Monday, the Financial Crimes Enforcement Network submitted notices withdrawing its 2020 rule on unhosted wallets, as well as a 2023 proposal to designate international crypto mixing a primary money laundering concern. Both notices are scheduled to appear in the Federal Register on Tuesday.

Coin Center, a Washington-based crypto advocacy group, said in a statement on Monday that the development was a big win for financial privacy.

The organization noted that the mixing definition was overly expansive and captured routine techniques that ordinary crypto users employ to maintain their privacy.

Because FinCEN recognized the challenge of pinpointing where a mixing transaction took place, Coin Center argued that risk-averse financial institutions would end up reporting even purely domestic transfers, leading to potentially serious unintended consequences for innocent users, such as restricted accounts or closures.

The unhosted wallet rule would have required banks and other financial firms to report certain crypto transactions exceeding $3,000 and $10,000 when customers kept their assets in unhosted wallets.

The mixing proposal had a broader scope. It classified mixing as anything that hid the origin, destination or amount of a crypto payment, including pooled funds, split transfers, single-use addresses and even exchanges between assets. FinCEN stated that commenters warned the definition might suppress legitimate activity and would overload institutions with paperwork.

Financial entities would have been required to disclose wallet addresses, transaction hashes, IP addresses and customer identification data.

The reversal also aligns with White House guidance. A July 2025 report from the President’s Working Group on Digital Asset Markets stated that the Trump administration supports the ability of lawful digital asset users to transact privately on a public blockchain and urged the Treasury to reconsider the rule.

The report acknowledged that criminals use mixers for money laundering but also pointed out that legitimate users rely on them for financial privacy.

FinCEN is not granting mixers immunity. The agency said that illicit actors still use mixers and other tools to impede law enforcement investigations.

It added that it will continue to monitor for money laundering and terrorist financing and may take action in the future.