The US Treasury, through the Financial Crimes Enforcement Network (FinCEN), has officially withdrawn two proposed rules aimed at increasing surveillance of cryptocurrency transactions. The first proposal, introduced in 2020, sought to extend Bank Secrecy Act obligations to banks and money services businesses for transactions involving unhosted wallets.
The 2020 proposal would have required recordkeeping for transactions exceeding $3,000 and government reporting for those over $10,000. It targeted transfers between regulated entities and self-custodied wallets or wallets in high-risk jurisdictions. The formal withdrawal of this proposal occurred on April 12, 2024.
Additionally, FinCEN withdrew a separate proposal from October 2023 that targeted cryptocurrency mixing services. These services pool and shuffle assets to obscure transaction trails on public blockchains. Neither proposal had been finalized, and both faced significant criticism regarding feasibility, privacy, and compliance costs.
The 2020 proposal received over 7,500 public comments, reflecting substantial industry concern. Critics argued that financial institutions lack practical methods to verify the identities of anonymous owners of self-custodied wallets. The withdrawal relieves centralized exchanges and financial institutions of these potential compliance burdens.
While these specific reporting frameworks will not move forward, existing Bank Secrecy Act obligations for regulated businesses remain in effect. Industry advocates suggest that removing these requirements reduces friction between centralized and decentralized systems and may foster a more favorable regulatory climate for institutional investment.
