FinCEN closes the unhosted-wallet file. The mixing file is closed, not sealed.

Two crypto proposals withdrawn on 5 October 2026 do not change any current US obligation. In our view, they confirm the direction the President’s Working Group set in July 2025 for US policy on self-hosted wallets and widen the prospective gap with the EU and the UK.

On 5 October 2026, the US Financial Crimes Enforcement Network (FinCEN) announced that it is withdrawing two proposed rules on convertible virtual currency (CVC) and, in one case, digital assets with legal tender status. Both notices were filed for public inspection the same day and are scheduled for publication in the Federal Register on 6 October, when the withdrawals take effect. Neither proposal was ever finalised, so no obligation that a crypto firm currently follows disappears. What changes is the outlook: the US proposal on self-hosted wallet transactions is gone, and FinCEN says it “will take no further action on this NPRM”.

What was withdrawn

The first notice (FR Doc 2026-20430) withdraws the notice of proposed rulemaking (NPRM) published on 23 December 2020 (85 FR 83840). It would have required banks and money services businesses (MSBs) to verify their customers and keep records of transactions above $3,000 where the counterparty used an unhosted or otherwise covered wallet, and to file reports with FinCEN on such transactions above $10,000, whether single or aggregated within 24 hours. An “otherwise covered” wallet was one held at a foreign institution not subject to the Bank Secrecy Act, in a jurisdiction FinCEN identifies.

The second notice (FR Doc 2026-20429) withdraws the October 2023 finding under section 311 of the USA PATRIOT Act that international CVC mixing is a class of transactions of primary money laundering concern, together with the proposed special measure (88 FR 72701, 23 October 2023). That measure would have required covered financial institutions to report transactions they knew, suspected or had reason to suspect involved CVC mixing within or involving a jurisdiction outside the United States, and to keep records on the customers involved.

Why FinCEN says it acted

Both notices cite the July 2025 report of the President’s Working Group on Digital Asset Markets; the press release frames the withdrawals as part of the Administration’s deregulatory agenda. The mixing notice quotes that report: the Administration “supports the ability of lawful users of digital assets to transact on a public blockchain privately". The report also acknowledges that, although illicit actors use mixers to launder funds, lawful users “may leverage mixers to enable financial privacy when transacting through public blockchains”. FinCEN says commenters’ concern informs the withdrawal that the “expansive definition” of mixing in the proposal “could have a chilling effect on legitimate activity” and place a large reporting burden on covered financial institutions.

The notice does not abandon the concern behind the proposal. FinCEN “maintains that illicit actors continue to use mixers”, says it “will continue to monitor activity involving CVC mixers”, and “may take appropriate steps in the future”. The unhosted-wallet file is closed. The mixing file is closed, not sealed.

What does not change

Both notices withdraw proposals and ado not mend no existing rule. Bank Secrecy Act programmes, suspicious activity reporting, and the recordkeeping and travel rule requirements for funds transfers continue as before. In our view, the practical effect on any US firm’s compliance manual today is nil; the effect is on what a firm should plan to build.

The transatlantic divergence

In our view, the withdrawal removes the prospect of a specific US rule for a transaction that the EU and the UK already regulate specifically: a transfer between a regulated platform and a self-hosted wallet. The 2020 proposal would also have required transaction reports to FinCEN, which neither the EU nor the UK rule requires.

In the EU, the Transfer of Funds Regulation (Regulation (EU) 2023/1113) requires a crypto-asset service provider (CASP) to obtain and hold originator and beneficiary information on every transfer to or from a self-hosted address (Articles 14(5) and 16(2)). Above EUR 1,000, it must also assess whether the address is owned or controlled by its customer.

In the UK, regulation 64G of the Money Laundering Regulations 2017 takes a risk-based route. A cryptoasset business “may request” information from its customer on an unhosted wallet transfer, having regard to its risk assessments. For transfers of £800 or more (counting any linked transfers) where the customer is the beneficiary, it may request the originator’s details. If it requests information and does not receive it, it “must not make the cryptoasset available to the beneficiary”.

In the US, after 6 October, FinCEN withdrew its 2020 unhosted-wallet proposal and said it will take no further action on it.

For a firm serving all three markets, the effect is what we call Regulatory Asynchronicity: the EU and the UK regulate this flow by specific rules, and, in our view, the US gap is unlikely to close soon. In our view, a control set already built for the EU and UK rules changes little; what the withdrawal removes is the case for a separate, heavier US variant.

What it means for CASPs

Business model. US banks and MSBs, including exchanges and on-ramps, no longer face a pending federal rule that would have required counterparty identity records for transfers above $3,000 to and from self-hosted wallets. In our view, fiat-to-crypto on-ramps that deliver to a customer’s own wallet gain the most, because that flow sat squarely inside the 2020 proposal.

Product. Groups with EU CASP or UK cryptoasset business operations keep their self-hosted wallet controls, because the Transfer of Funds Regulation and Regulation 64G still apply to those transfers. Those controls are unaffected by the US withdrawal.

Revenue. In our view, nothing moves this quarter. Neither proposal was in force, so no current compliance cost is removed. The saving is avoided contingency build, which in our view belongs in 2027 US product planning.

What firms can reasonably do now?

Contingency work scoped to the 2020 proposal can come off US compliance roadmaps, while EU and UK self-hosted wallet controls stay in place.

Mixer-exposure policies are worth re-reading against the mixing notice. In our view, with no special measure pending, existing risk-based monitoring and suspicious activity reporting remain the control.

Timeline

23 December 2020: unhosted-wallet NPRM published, 85 FR 83840.

23 October 2023: CVC-mixing section 311 finding and proposed special measure published, 88 FR 72701.

July 2025: President’s Working Group report on digital asset markets.

5 October 2026: withdrawals announced by FinCEN and filed for public inspection.

6 October 2026: scheduled Federal Register publication; withdrawals take effect.

Not scheduled: any future FinCEN action on mixers.

Sources: FinCEN, “FinCEN Announces Withdrawals of Proposed Digital Asset Related Rules”, 5 October 2026; FR Doc 2026-20430; FR Doc 2026-20429; Regulation (EU) 2023/1113; Money Laundering Regulations 2017, regulation 64G.

This article is for information only and is not legal advice.

James Ross, Head of Advisory, Denouement