Treasury Killed Two Surveillance Rules After Six Years
The U.S. Treasury withdrew two crypto surveillance proposals on October 5, ending nearly six years of debate over the first one. FinCEN dropped its 2020 unhosted wallet reporting requirement and a 2023 plan to classify international mixing as a primary money laundering concern.
The withdrawn crypto surveillance measures would have forced banks to monitor customer wallets and file reports on transactions involving privacy tools.
The $10,000 Unhosted Wallet Rule
The 2020 rule would have forced banks and money-service businesses to report any customer transfer above $10,000 to an unhosted wallet. That included multiple transfers that added up to the threshold within 24 hours. Companies would have needed to collect the customer's identity and details about the wallet receiving the funds.
Treasury proposed the rule in December 2020 under the first Trump administration. It sat unresolved through two presidencies and drew thousands of public comments before the second Trump administration killed it.
The $10,000 threshold sat at the same level as the Bank Secrecy Act's cash reporting requirement, but applying it to crypto would have created a much wider net. Every on-chain transaction is traceable, and the 24-hour aggregation rule would have captured routine trading activity that never crossed the line in a single transfer.
The Mixing Proposal's Broad Definition
The mixing proposal came later but died faster. FinCEN released it in October 2023, defining mixing as any technique that obscures a transaction's source, destination, or amount. That definition covered pooling funds, splitting transfers, using single-use wallets, and allowing user-initiated delays.
Every bank would have been required to file reports including wallet addresses, transaction hashes, and IP addresses whenever they spotted mixing activity. The definition was broad enough to catch ordinary privacy-preserving methods alongside actual money laundering operations.
Why FinCEN Reversed Course
FinCEN's withdrawal notice said the mixing rule could create a "chilling effect on legitimate activity" and would "place a large reporting burden on covered financial institutions." Risk-averse banks would have reported domestic transactions as well, potentially triggering account closures for customers who had done nothing wrong.
The Trump administration's crypto policy shifted between the two proposals. A July 2025 presidential working group report acknowledged that "lawful users of digital assets may use mixers to enable financial privacy." That language marked a reversal from the approach the same administration had taken four years earlier.
Both withdrawals fit the current administration's deregulatory push. FinCEN said the agency wants to make digital-asset rules "fit-for-purpose" instead of applying frameworks designed for traditional finance. Congress failed to pass crypto legislation, so agencies have moved ahead with their own rules and reversals.
The withdrawn proposals would have applied to every exchange and money-service business operating in the U.S. Unhosted wallets, also called self-custody or private wallets, are any wallets not held by a third-party custodian. Industry groups spent $8 million lobbying for the Clarity Act, which would have created a clearer regulatory framework, but the bill fell 14 votes short in September.