U.S. crypto rules shift as FinCEN drops wallet and mixing proposals

The Financial (FinCEN) has withdrawn two proposed regulations regarding cryptocurrency. This may signal a shift toward a more measured approach to crypto regulation in the United States, as regulators reassess proposed rules in light of industry feedback.

According to FinCEN, withdrawing these proposals was part of an ongoing process to develop better rules that are relevant to regulating cryptocurrencies with regard to public comment.

One proposal that was withdrawn focused on transactions with non-hosted wallets, while another addressed the practice known as crypto-mixing.

The “wallets” proposal would have potentially required financial institutions to report all transactions involving a customer’s unhosted wallet that were greater than or equal to $10,000.

Additionally, if the transaction was greater than or equal to $3,000, the institution would have been required to maintain records related to the transaction.

Since neither of these proposals resulted in final rules, their withdrawal will not result in a reduction in current compliance obligations. Instead, the withdrawal prevents these new proposed requirements from developing into future rules for financial institutions.

Thus, as a result of this action, there is reduced uncertainty related to regulation of self-custody, and existing Anti-Money Laundering (AML) sanctions requirements remain intact.