The Financial Crimes Enforcement Network has withdrawn its 2020 proposal for transactions involving unhosted cryptocurrency wallets. The agency’s formal notice says it will take no further action on that rulemaking. The withdrawal was filed on October 5 and scheduled for Federal Register publication on October 6.
The underlying proposal appeared in the Federal Register on December 23, 2020, at 85 FR 83840. It remained pending while FinCEN considered public comments. Deputy Director Jimmy L. Kirby signed the withdrawal notice, which identifies the docket as RIN 1506-AB47.
FinCEN never finalized these requirements. The withdrawal ends a pending rulemaking; it does not repeal obligations that had already taken effect.
What the proposal covered
The notice applied to banks and money services businesses handling convertible virtual currency or digital assets with legal-tender status. It addressed transactions in which the counterparty used an unhosted wallet or another covered wallet. FinCEN described an unhosted wallet as one from which a financial institution was not required to conduct transactions.
The proposed definition of another covered wallet reached certain wallets held at financial institutions outside the Bank Secrecy Act framework in foreign jurisdictions identified by FinCEN. The proposal therefore did not establish a universal reporting rule for every transfer between a customer and any external wallet.
For a transaction above $10,000, or multiple transactions totaling more than $10,000 within 24 hours, a bank or money services business would have filed a report containing specified information about its customer’s transaction and the counterparty. It also would have verified its customer’s identity. Transactions above $3,000 would have triggered recordkeeping requirements, including customer identity verification.
The official notice is narrower than claims that every wallet owner would have faced direct identity checks. Its operative duties were assigned to covered banks and money services businesses, and its verification language referred to their customers. The proposal also sought information about counterparties, but those are separate requirements in the document.
Withdrawal closes this docket
FinCEN said it considered public comments before withdrawing the proposal. The agency tied the decision to the administration’s effort to make digital-asset regulation fit for purpose, but the notice does not announce a replacement rule or timetable. Its concrete effect is to close RIN 1506-AB47 without further action.
FinCEN announced a second withdrawal at the same time involving a proposed special measure for convertible virtual currency mixing. That is a separate rulemaking. The unhosted-wallet notice does not erase the distinction between self-custody, activity conducted through a regulated institution and the agency’s separate work on mixing transactions.
Compliance teams can remove this specific 2020 proposal from their list of pending rules. The withdrawal itself makes no broader finding that unhosted-wallet transactions sit outside existing financial-crime law, and it does not impose the reporting and recordkeeping framework described in the abandoned proposal.
Adapted from FinCEN Withdraws 2020 Unhosted Wallet Rule, No More Action.