US Treasury scraps proposed reporting rules for unhosted wallets and crypto mixers
FinCEN has pulled back proposals that would have imposed new reporting and verification duties on transactions involving self-custodied wallets and crypto mixing
The Financial Crimes Enforcement Network is dropping two proposed crypto regulations, including a 2020 rule targeting unhosted wallets and a 2023 proposal on international crypto mixing, Coin Center first reported.
Under the 2020 proposal, banks and money service businesses would have been required to report certain crypto or digital asset transactions involving an unhosted wallet or a wallet held at a foreign financial institution not subject to the Bank Secrecy Act.
Reporting would have applied when a transaction exceeded $10,000, or when multiple transactions involving the same circumstances exceeded $10,000 over 24 hours, while transactions above $3,000 would have required records and customer identity verification. FinCEN said the proposal would not move forward.
The agency is also withdrawing its 2023 proposal to impose a special measure on international convertible virtual currency mixing, covering methods such as pooling funds, algorithmically coordinating transactions, splitting transfers, using single-use wallets, exchanging digital assets and delaying transactions.
The proposed rule would have required financial institutions to report detailed information when they knew, suspected or had reason to suspect that a transaction involved international crypto mixing.
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The information could have included the amount and type of crypto, mixer and wallet details, transaction hashes, dates, IP addresses and descriptions of the activity, as well as identifying information for customers.
FinCEN decided to abandon the mixer proposal after considering concerns that its broad definition could have a chilling effect on legitimate crypto activity and create a heavy reporting burden for financial institutions.
The withdrawals are part of efforts to make digital asset regulations fit for purpose, FinCEN noted. The agency stated that it will continue monitoring crypto mixers for signs of illicit finance, with the option of taking further action in the future.