FinCEN drops its rule on transfers to self-custody wallets, and leaves a door open on crypto mixers

The Financial Crimes Enforcement Network on Monday withdrew two proposals that had hung over how American banks and money transmitters move tokens off their own books. The first, published in December 2020, would have required banks and money services businesses to file a report and verify their customer's identity whenever a counterparty used an unhosted wallet and a transfer exceeded $10,000, or several transfers aggregated above $10,000 in 24 hours, and to keep records above $3,000. The second, published in October 2023 under section 311 of the USA Patriot Act, would have declared international convertible virtual currency mixing a class of transactions of primary money laundering concern, with reporting and recordkeeping on any transaction an institution knew or suspected had passed through a mixer. Both withdrawals were filed for public inspection at 8.45am on 5 October and appear in the Federal Register on Tuesday.

The two notices are not worded alike. Of the wallet proposal FinCEN says flatly that it "will take no further action on this NPRM". The mixing notice is more hedged. It quotes the White House's July 2025 digital asset report, which said "the Trump Administration supports the ability of lawful users of digital assets to privately transact on a public blockchain", and says commenters had warned that the proposed definition of mixing "could have a chilling effect on legitimate activity and place a large reporting burden on covered financial institutions". That definition was wide: it reached pooling funds from several wallets, splitting transfers, single-use addresses and exchanging one digital asset for another. But FinCEN also writes that "illicit actors continue to use mixers and other tools and methods to hinder law enforcement investigations", and that it will keep watching and "may take appropriate steps in the future".

The wallet rule was the one aimed at the edge of onchain markets. Its threshold sat on the line every American exchange, bank or money transmitter dealing in tokens crosses when a customer withdraws to an address of their own, and it would have attached a report and an identity check to that step. The 2020 text also reached "digital assets with legal tender status", so a central bank digital currency sent to a self-custodied wallet would have been caught as well. The mixing proposal was the larger burden. American Banker, the only outlet outside the crypto trade press found carrying the story, reports FinCEN's own estimate in the 2023 proposal that about 15,000 institutions would have filed the mixer reports, at a combined 1.47 million hours a year, and describes it as the first time FinCEN had used section 311 against a whole class of transactions rather than a particular bank or country.

Accounts of the timing differ. CoinDesk reported that FinCEN "withdrew the rule Sunday". FinCEN's release is dated 5 October, a Monday, and the Federal Register records both filings that morning, which is also how American Banker reported it. What follows is less clear. The wallet notice closes the question for now; the mixing notice leaves open whether a narrower designation could come later, and neither says what, if anything, FinCEN would ask of banks and money transmitters at the boundary with self-custody instead.