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- FinCEN is withdrawing its 2020 proposal covering certain transactions involving unhosted crypto wallets.
- The proposal included a $3,000 recordkeeping threshold and reporting for transactions above $10,000.
- More than 7,500 comments were submitted during the original consultation period.
- The withdrawal ends this specific reporting framework, not existing Bank Secrecy Act obligations.
The U.S. Financial Crimes Enforcement Network is abandoning a proposed crypto reporting regime that would have imposed additional identity, recordkeeping and reporting requirements when regulated financial institutions handled certain transactions involving self-custody wallets.
FinCEN said on Oct. 5 that it is withdrawing the December 2020 proposal after considering public comments and will take no further action on the rulemaking. The withdrawal notice is scheduled for publication in the Federal Register on Oct. 6.
For crypto users, the practical consequence is specific: a proposed compliance layer for moving assets between regulated platforms and personally controlled wallets will not take effect.
The $3,000 and $10,000 Rules Are Gone
The proposal applied to banks and money services businesses dealing with convertible virtual currency or digital assets with legal-tender status.
For certain transactions involving an unhosted wallet, FinCEN proposed recordkeeping and identity-verification requirements above $3,000.
A second threshold applied to larger transfers. Transactions above $10,000, including qualifying transactions aggregating beyond $10,000 during a 24-hour period, would have required reporting to FinCEN. The framework also covered certain wallets hosted by financial institutions in jurisdictions identified by the agency.
The obligations were aimed primarily at the regulated bank or money services business interacting with the wallet. They did not turn a person using their own wallet into a regulated financial institution simply because they controlled their private keys.
That distinction is particularly relevant for transfers between a centralized exchange and self-custody. The proposed regime would have required the regulated intermediary to collect additional information even though the receiving or sending blockchain address could sit outside another regulated institution.
Why the Proposal Became Controversial
FinCEN gave the original proposal a short comment period in December 2020 before reopening and later extending it in January 2021.
The response was unusually large. FinCEN said it reviewed more than 7,500 comments submitted during the original consultation period before granting additional time for feedback.
One of the central objections concerned counterparty information.
Unlike a conventional transfer between two banks, sending crypto to a blockchain address does not necessarily provide a regulated exchange with standardized information identifying whoever controls the address.
Coin Center argued in its December 2020 comments that placing additional barriers between regulated exchanges and self-custody could have the opposite effect intended by policymakers, making users more likely to transact entirely through personally controlled wallets and reducing the information available to regulated intermediaries.
That was an industry argument rather than FinCEN’s conclusion, but it illustrates the policy problem the agency was trying to solve: extending financial surveillance requirements to transactions where one side may have no regulated intermediary collecting customer information.
What Still Applies After the Withdrawal
The decision should not be interpreted as removing anti-money laundering controls from crypto exchanges.
Banks and money services businesses remain subject to applicable requirements under the Bank Secrecy Act, including existing anti-money laundering, recordkeeping and reporting obligations.
The narrower change is that FinCEN will not add the crypto-specific framework contemplated by this particular 2020 proposal.
Self-custody itself also remains distinct from providing a custodial financial service. FinCEN’s longstanding guidance focuses heavily on whether a person or business accepts and transmits value for others, rather than simply providing software that lets users control their own assets.
FinCEN Is Changing Its Regulatory Approach
FinCEN says the withdrawal follows its review of public comments and forms part of the Trump administration’s deregulatory agenda and efforts to make digital-asset rules “fit-for-purpose.”
The agency is also withdrawing a separate proposal that would have designated international convertible virtual currency mixing as a class of transactions of primary money laundering concern.
That does not mean FinCEN is retreating from digital-asset enforcement or illicit-finance oversight more broadly.
Its Federal Register activity continues to include measures targeting specific financial networks and transactions considered money-laundering risks.
The policy direction is therefore becoming more targeted. Instead of finalizing a broad reporting regime triggered partly by interaction with self-custody wallets, FinCEN is dropping this proposal while retaining its existing Bank Secrecy Act authorities and the ability to pursue narrower measures.
For exchanges and wallet users, the immediate result is much simpler: the proposed $3,000 recordkeeping and $10,000 reporting framework will not become another compliance checkpoint between a regulated platform and a self-custody wallet.
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