U.S. Backs Down on Crypto Privacy: Controversial Tracking Proposal Shelved!
The Treasury Department’s FinCEN withdrew its 2023 proposal to impose broad reporting requirements on crypto mixing activities, citing concerns that it could also cover legitimate privacy transactions.
According to a notice reported by The Block, the Financial Crimes Enforcement Network (FinCEN) will not move forward with its initiative to designate international crypto mixing transactions as a class of transactions of primary money laundering concern. The notice was made public on Monday, October 5, with official publication scheduled for Tuesday, October 6.
Crypto mixers are used to make it harder to trace the link between the source and destination of transactions. At the center of the debate was concern that the proposal was broad enough to cover not only these services but also methods ordinary users rely on to protect their privacy.
Wallet and IP addresses would have been reported
Had the proposal taken effect, banks and other covered financial institutions would have submitted reports on mixing transactions containing information ranging from wallet addresses and transaction IDs to IP addresses.
The definition also included methods such as pooling funds, splitting transactions, using one-time wallets, and delays that make it harder to match incoming and outgoing funds over time. FinCEN said it had taken into account comments raising concerns that this scope could discourage legitimate privacy use and impose a heavy reporting burden on institutions.
In its January 2024 comment letter, Coinbase had also warned that because the proposal did not include a monetary threshold, it could lead to the bulk reporting of transactions that were not suspicious.
Privacy use acknowledged, monitoring to continue
The decision also cited the President’s Working Group on Digital Asset Markets’ July 2025 report. The report stated that digital asset users may legally use mixers to achieve financial privacy on public blockchains.
FinCEN maintains that illicit actors also use these tools to impede investigations. The agency will continue to monitor activities linked to mixers and may take further action as necessary. Withdrawal of the proposal, which had not been finalized, does not change financial institutions’ existing obligations.
In a separate notice issued the same day, the agency also withdrew a 2020 proposal that would have imposed additional identity verification and recordkeeping requirements on certain transactions involving unhosted wallets; this decision on mixing activities ends a separate regulatory initiative from 2023.