The US Financial Crimes Enforcement Network has withdrawn a long-dormant proposal that would have subjected self-custodied crypto wallets to strict reporting and identity-verification requirements, closing out a regulatory debate that began under the first Trump administration.
The withdrawal is set to be published in the Federal Register on October 6. The underlying rule was first drafted on December 23, 2020, in the final weeks of Donald Trump's first term, but it never took effect after drawing significant pushback from industry and privacy advocates at the time.
As originally proposed, the rule would have required banks and payment providers to report transactions above 10,000 US dollars involving self-custodied wallets to FinCEN and to verify the identity of the customer involved. Transactions above 3,000 US dollars would have triggered recordkeeping obligations, including the collection of counterparty information. The rule's reach extended further still: it would have also applied to wallets held at foreign financial institutions that FinCEN had placed on a list of entities not subject to US anti-money-laundering law.
FinCEN's withdrawal notice cites a report from the President's Working Group on Digital Asset Markets as the basis for abandoning the proposal. The announcement is signed by Jimmy L. Kirby, Deputy Director of FinCEN.
Why it matters for Europe
The decision carries weight beyond US borders. Self-custody wallets, which let holders manage crypto assets without routing them through a licensed intermediary, have been a recurring flashpoint in European policy discussions as regulators weigh anti-money-laundering ambitions against privacy protections. FinCEN's retreat from mandatory identity checks on self-custodied transfers offers a concrete precedent that European officials working on related rules, including transfer-of-funds requirements under the bloc's anti-money-laundering framework, are likely to examine.
For European crypto users and firms, the episode is a reminder that the regulatory treatment of self-custody remains unsettled on both sides of the Atlantic. Where Washington has now formally stepped back from a rule it drafted nearly five years ago, Brussels continues to weigh how far similar reporting obligations should extend to wallets that sit outside the custody of regulated institutions.
No further rulemaking on the matter has been announced by FinCEN.
