FinCEN withdraws 2020 proposal requiring banks to track personal crypto transfers
The Financial Crimes Enforcement Network has withdrawn a 2020 proposal that would have forced banks and exchanges to track transfers from personal crypto wallets, citing a White House directive to keep digital asset rules “fit-for-purpose.” The retreat removes a reporting regime institutional custodians and exchanges had budgeted against for six years, and it arrives alongside a separate withdrawal of a 2023 rule targeting crypto mixing services.
- FinCEN will take no further action on a 2020 rule requiring ID checks on wallet transfers above $3,000 and reports on transfers above $10,000.
- A second, 2023 proposal targeting crypto mixing services was also withdrawn the same day, despite being slated for final action in December 2027.
- Developer Roman Storm faces a Tornado Cash retrial in April 2027, keeping the legality of mixing services before a federal court even as regulators step back.
- $10,000 reporting trigger the withdrawn 2020 rule would have set
- $3,000 threshold for mandatory ID checks on wallet transfers
- Dec 2027 prior deadline for finalizing the now-scrapped mixing rule
FinCEN said in a filing that it will take no further action on the 2020 proposal, which would have required banks and crypto exchanges to verify customer identities on transfers above $3,000 from personal, or “unhosted,” wallets, apps or devices where users hold their own coins rather than leaving them with a custodian. Transfers above $10,000, or several totaling that sum within 24 hours, would have triggered a report to the bureau. The rule never took effect in the six years it sat on Treasury’s books.
The withdrawal was first reported by BeInCrypto. Both notices take effect upon publication in the Federal Register on Tuesday (October 6).
FinCEN Cites 2025 White House Report to Justify Retreat
The filing ties the withdrawal to a July 2025 White House crypto report, arguing the 2020 framework no longer fits how digital assets move.
The Trump Administration supports the ability of lawful users of digital assets to privately transact on a public blockchain.
FinCEN filing
That language reverses the posture FinCEN took in December 2020, when the original proposal framed unhosted wallet activity as a money-laundering blind spot worth closing before a new administration took office. Existing anti-money-laundering duties, including suspicious activity reports and sanctions screening, remain in force regardless of the withdrawal.
Every Bitcoin transfer still posts to a public ledger, where wallet-to-wallet payments remain traceable without the scrapped verification rule.
Mixing Rule Dies Despite Unified Agenda Listing December 2027
FinCEN also withdrew a 2023 proposal built on Section 311 of the USA PATRIOT Act, which would have required covered banks and money services businesses to report suspected convertible virtual currency mixing with a foreign link. As recently as this cycle, Treasury’s own unified regulatory agenda still listed the rule for final action in December 2027, four years after it was first proposed.
The agenda had defined CVC mixing broadly, as facilitating transactions “in a manner that obfuscates the source, destination, or amount,” regardless of protocol or service, while carving out an exception for banks, broker-dealers and virtual asset service providers that preserve internal transaction records for regulators. In practice, that exception meant large exchanges and custodians could run internal mixing-like functions without tripping the reporting duty, while standalone mixing services like Tornado Cash would not. The withdrawal report says commenters warned the definition risked sweeping in legitimate privacy tools alongside illicit ones.
FinCEN did not rule out acting again. The bureau said illicit actors still use mixers and that it may revisit the issue in the future, leaving open whether a narrower definition eventually replaces the one it just dropped.
Storm’s April 2027 Retrial Keeps Mixing Law in Court, Not Just Rulemaking
Criminal enforcement is moving on a separate track from the rulemaking retreat. Roman Storm’s Tornado Cash retrial is set for April 2027, meaning a federal jury, not FinCEN, will decide the legal exposure of mixing-service developers well after this week’s withdrawal takes effect.
The split mirrors how other crypto rulemakings are proceeding piecemeal rather than through one comprehensive framework, from the SEC’s pending custody rule for investment advisers to the Federal Reserve’s reserve and capital proposal for GENIUS Act stablecoins. Illicit-finance concerns around mixers have not disappeared either, as enforcement continues through individual cases and sanctions screening.
The CCS read. We read this as a compliance reprieve for custodians and exchanges rather than a privacy milestone for holders. The wallet-verification costs those firms would have absorbed are gone for now, narrowing the overlap with parallel SEC and Fed rulemakings. FinCEN’s retreat on mixing, paired with Storm’s ongoing prosecution, suggests enforcement will keep running through individual cases rather than blanket reporting mandates.
Both withdrawal notices publish in the Federal Register on Tuesday (October 6), closing the file on two rules that sat unfinished for as long as six years. FinCEN has left open whether illicit use of mixers will eventually prompt a narrower successor rule, a question Storm’s April 2027 retrial may answer in court well before regulators move again.
