Effective October 6, 2026, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) withdrew two proposed rules that would likely have had a significant impact on transactions related to unhosted wallets and convertible virtual currency (CVC).
The first notice of proposed rulemaking (NPRM), initially promulgated in December 2020, would have applied verification, recordkeeping and reporting obligations under the Bank Secrecy Act (BSA) to certain transactions between hosted and unhosted wallets involving CVC or digital assets with legal tender status (LTDAs). The second NPRM, released in October 2023, would have imposed additional reporting and recordkeeping requirements on banks and other covered financial institutions for transactions involving CVC mixing within or involving a foreign jurisdiction.
Because the two proposed rules did not become final rules, their withdrawal does not impact existing BSA or related anti-money laundering (AML) requirements for financial institutions.
Overview of the withdrawn proposed rules
2020 proposed rulemaking
A hosted wallet is a digital account hosted by a third-party financial institution such as a bank or money services business (MSB), which allows the user to store, send and receive cryptocurrency using an account maintained by the host. Unhosted, or self-hosted, wallets are held by people themselves and not by a third-party financial institution or at an exchange. While hosted wallet providers are subject to the BSA and related AML requirements, persons that execute transactions on their own behalf through unhosted wallets generally are not subject to the BSA. The impetus for the rule, according to FinCEN, was to address this perceived regulatory gap in the AML regime and prevent the facilitation of money laundering via unhosted wallets.
The 2020 NPRM required covered financial institutions to file a report for customers transacting in more than $10,000 in cryptocurrency per day if the counterparty to the transaction was using an unhosted wallet or a wallet otherwise covered by the NPRM. The NPRM also required banks and MSBs to collect certain transaction information and maintain a record for transactions involving a CVC or LTDA transaction of more than $3,000.
2023 proposed rulemaking
The 2023 NPRM would have imposed additional reporting and recordkeeping requirements on banks and other covered financial institutions for transactions when they knew, suspected or had reason to suspect a CVC transaction involved the use of mixing within or involving a foreign jurisdiction.
“CVC mixing” was defined, in part, as “activity that entailed the facilitation of CVC transactions in a manner that obfuscates the source, destination, or amount involved in one or more transactions regardless of the type of protocol or service.” FinCEN issued the NPRM pursuant to section 311 of the USA PATRIOT Act, which permits the treasury secretary to impose special measures, such as additional reporting and recordkeeping requirements, on financial institutions upon a finding that a class of transactions within or involving a foreign jurisdiction is of “primary money laundering concern.”
The proposed rule required covered financial institutions to file a report with FinCEN containing certain information related to CVC mixing transactions and to keep records of customers associated with covered transactions, including the customer’s full identity, date of birth, home address, email address or unique identifying numbers.
What’s next
FinCEN stated in a press release that it was withdrawing the proposed rules in response to comments received and “as part of the Trump Administration’s deregulatory agenda and ongoing efforts to ensure digital asset regulations are fit-for-purpose.”
Specifically with respect to the 2023 NPRM, FinCEN formally withdrew both its stated finding that international CVC mixing is a “class of transactions of primary laundering concern” and the proposal itself. As support, FinCEN referenced a July 2025 report by the President’s Working Group on Digital Asset Markets established by Executive Order 14178, “Strengthening American Leadership in Digital Financial Technology.” The report acknowledged the concerns regarding illicit actors using mixing to launder funds yet noted that lawful actors could in fact use mixers to “enable financial privacy when transacting through public blockchains” and recommended that the Treasury Department instead “consider next steps regarding its proposed rulemaking concerning CVC mixing.” In support of the withdrawal of the 2020 NPRM, FinCEN referred to the Trump administration’s efforts to ensure digital asset and cryptocurrency regulations are “fit-for-purpose” as stated in the July 2025 report.