FinCEN Withdraws Proposed Crypto Mixing Reporting Rule

The Financial Crimes Enforcement Network, or FinCEN, announced on Oct. 5 that it is withdrawing a reporting proposal aimed at crypto mixing. The agency is also rescinding its 2023 finding that international crypto mixing constitutes a class of transactions of primary money laundering concern.

The proposal would have required financial institutions to report customer data and transaction details if they knew or suspected that a transaction involved mixing in a jurisdiction outside the US. The definition of mixing in the proposal was broad, covering activities such as pooling funds, splitting transfers, and using single-use wallets.

FinCEN stated that it decided to withdraw the rule following concerns from commenters that the expansive definition could create a significant reporting burden and potentially chill legitimate activity. The withdrawal is scheduled to take effect upon its publication in the Federal Register on Oct. 6.

Had the rule been implemented, institutions would have been required to report information including wallet addresses, transaction hashes, IP addresses, and customer identity details. The agency also confirmed it will take no further action on a separate 2020 proposal regarding unhosted wallets, which had previously been listed as withdrawn.

Despite this change, crypto money transmitters remain subject to existing regulatory requirements. These include maintaining risk-based anti-money-laundering programs, registering with the agency, and fulfilling recordkeeping and suspicious activity reporting obligations. Qualifying transfers also continue to fall under the Funds Travel Rule.

FinCEN noted that it will continue to monitor crypto mixing for potential illicit activity, including money laundering and terrorist financing, and may pursue future regulatory steps.