FinCEN drops crypto mixing proposal as backlash kills rule

US Treasury’s Financial Crimes Enforcement Network (FinCEN) announced on Oct. 5 that it is withdrawing a reporting proposal for crypto mixing, the use of techniques that obscure a transaction’s source, destination, or amount.The plan reached beyond dedicated mixing services and would have required financial institutions to report information about covered transactions and their customers.The agency is withdrawing both its 2023 finding that international crypto mixing is a class of transactions of primary money laundering concern and the proposed recordkeeping and reporting rule.The withdrawal notice lists Oct. 6 as its scheduled Federal Register publication date and states that withdrawal will take effect upon publication. FinCEN cited commenters’ concerns that the expansive definition could chill legitimate activity and impose a large reporting burden.The proposed definition applied regardless of the protocol or service used. Examples included pooling funds, coordinating transactions with code, splitting transfers, routing funds through a series of single-use wallets, exchanging between crypto assets, and introducing user-initiated delays.The proposed obligation applied when a cov...