FinCEN Dropped Its Crypto Mixer Rule. The Definition It Wrote Would Have Covered a Lot of Ordinary Code.

FinCEN withdrew two crypto proposals on October 6, and they were not written the same way. The notice killing the December 2020 unhosted wallet rule says FinCEN “will take no further action” on it [2]. The notice killing the 2023 mixer rule says FinCEN “will continue to monitor” mixers and “may take appropriate steps in the future” [1].

One of those is a closed ticket. The other is a ticket moved to the backlog.

What FinCEN actually withdrew

The bigger of the two is FR Doc. 2026-20429, published at 91 FR 63513 and signed by Deputy Director Jimmy L. Kirby [1]. It withdraws the October 23, 2023 proposal, published at 88 FR 72701, along with the finding underneath it: that international convertible virtual currency mixing is a class of transactions of primary money laundering concern under Section 311 of the USA PATRIOT Act [1, 3]. American Banker notes that it was FinCEN’s first use of Section 311 against an entire class of transactions [5].

Section 311 lets Treasury pick from five special measures once it makes that kind of finding [1]. FinCEN had chosen special measure one, which is recordkeeping and reporting [1]. Under the proposal, any covered financial institution that knew, suspected or had reason to suspect a transaction involved foreign mixing would have filed a report within 30 calendar days of detecting it [3]. The report would have carried the amount, the asset, the mixer used, customer wallet addresses, transaction hashes, IP addresses and a narrative, and the institution would have kept the customer’s full identity, date of birth, address and email [1, 3].

FinCEN’s own paperwork estimate was about 15,000 affected institutions and 1,470,000 burden hours a year [3]. The 2023 notice also said the personal data of more than 300 million unhosted wallet users could end up in reports if their wallets touched a covered transaction [3].

The second notice, FR Doc. 2026-20430 at 91 FR 63514, withdraws the December 23, 2020 proposal at 85 FR 83840 [2]. That one would have made banks and money services businesses report transactions above $10,000 with unhosted wallets or wallets at institutions in jurisdictions FinCEN named, and keep records and verify customers above $3,000 [2].

Neither proposal was ever final, so no current obligation changes [5].

Why FinCEN says it backed off

The mixer notice gives two reasons. Commenters warned that the definition was so broad it “could have a chilling effect on legitimate activity” and would put “a large reporting burden” on covered institutions [1]. And the President’s Working Group on Digital Asset Markets, in its July 2025 report, told Treasury to “consider next steps” on the proposal [1, 4].

That report says FinCEN received more than 2,200 comments [4]. It also says plainly that “lawful users of digital assets may leverage mixers to enable financial privacy when transacting through public blockchains,” while noting North Korean and ransomware actors still use them [4].

There’s a small wrinkle in the citation. FinCEN’s notice quotes the report as saying “the Trump Administration supports the ability of lawful users of digital assets to privately transact on a public blockchain” [1]. I read the report. The closest passage I found says the Working Group “supports civil liberties protections surrounding privacy and the ability of individuals to privately transact on public blockchains” [4]. American Banker reported the same mismatch [5]. The substance is about the same. It is still odd to see a misquote in a two-page Federal Register notice.

Not everyone wanted the rule gone. American Banker reports that the Independent Community Bankers of America, the only bank trade group to comment, had argued the proposal didn’t go far enough and is disappointed by the withdrawal [5].

The definition was the problem, and you’d have been in it

This part is opinion.

If you write wallet software, payment routing or anything that batches transactions, go back and read the 2023 definition, because it is the clearest statement of how FinCEN thinks about this. “CVC mixing” meant facilitating transactions “in a manner that obfuscates the source, destination, or amount,” regardless of protocol, with six examples [3]. Among them: pooling funds from multiple wallets, “using programmatic or algorithmic code to coordinate, manage, or manipulate the structure of a transaction,” creating single-use addresses, swapping between assets and “facilitating user-initiated delays” [3]. A “CVC mixer” was “any person, group, service, code, tool, or function” that did any of that [3].

Read that list as an engineer. Fresh change addresses are standard wallet behavior. Batching is how exchanges save on fees. Swaps are what a DEX does. Scheduled sends are a feature. The proposal had an exception, but it covered only banks, broker-dealers and money services businesses using internal protocols that keep source and destination records [3]. Your open-source wallet library wasn’t in it.

To be fair, the rule’s duties fell on financial institutions, not developers [3]. But reporting rules shape products downstream. An exchange that has to file within 30 days on anything its analytics tool flags as mixing exposure would likely start rejecting deposits from wallets that look like mixers, and “looks like” was going to be decided by heuristics. FinCEN admitted in 2023 that automated attribution “can be easily defeated” by routing through token contracts [3]. So the honest users get flagged and the careful launderers don’t.

My read on the process is mixed. It’s good that FinCEN withdrew through a published notice that gives reasons rather than letting the docket go quiet. It’s less good that the reasons run to one paragraph after more than 2,200 comments [1, 4].

The door FinCEN left open

The unhosted wallet withdrawal is final in tone: no further action [2]. The mixer withdrawal is not. FinCEN says it “maintains that illicit actors continue to use mixers” and will keep watching “for indicia of money laundering, terrorist financing, or other illicit finance activity” [1].

What would the next version look like? The White House report gives a hint. It says Section 311’s fifth special measure is limited to correspondent or payable-through accounts, which “do not translate to the digital asset industry,” and recommends Congress add a sixth measure letting FinCEN prohibit or condition “transmittals of funds” [4]. That would be a narrower, targeted tool than the 2023 class-wide reporting rule.

What I’m watching

• A replacement proposal. The report notes that Section 311 special measures frequently require notice-and-comment rulemaking [4], so a new mixer measure would most likely start as a fresh proposal. Nothing is on the table as of today.
• Congress and a sixth special measure. The report’s recommendation needs legislation [4]. If it shows up in a digital asset bill, that’s where the next mixer fight happens.
• Whether exchanges change anything. Existing suspicious activity reporting duties still apply with or without this rule [3, 5]. Watch whether deposit screening on mixer exposure loosens now, or stays where compliance teams already set it.