US Treasury withdraws proposed crypto surveillance rules on unhosted wallets and mixing

The US Treasury has pulled the plug on a set of proposed crypto surveillance rules. They targeted unhosted wallets and convertible virtual currency (CVC) mixing, two areas regulators have circled for years. The move came through the Financial Crimes Enforcement Network, better known as FinCEN. What Treasury actually withdrew The centerpiece is a notice of proposed rulemaking (NPRM) first floated in 2020, during the Trump Administration. It would have stretched Bank Secrecy Act obligations to cover banks and money services businesses (MSBs) handling transactions with unhosted wallets. An unhosted wallet is one where the user holds the private keys, rather than an exchange or custodian. The 2020 proposal set two thresholds. Transactions above $3,000 would have triggered recordkeeping and customer verification requirements. Transactions above $10,000 would have required reporting to the government. The rule aimed squarely at transfers involving unhosted wallets, along with wallets hosted in jurisdictions deemed high-risk. Banks and MSBs would have needed to collect information on counterparties who, by design, are not their customers. According to the research findings, the formal wit...