Treasury Just Chose Crypto Privacy Over Surveillance. Investors Should Read the Fine Print

The Financial Crimes Enforcement Network (FinCEN), a Treasury Department bureau focused on combating money laundering, announced it would withdraw two proposed rules that would have required banks and exchanges to report users who mix cryptocurrencies or manage their own wallets.

This decision is a significant win for advocates of crypto privacy, though it doesn’t drastically alter the experience for Bitcoin (CRYPTO:BTC) holders who purchase through regulated exchanges like Coinbase (NASDAQ:COIN | COIN Price Prediction).

Deputy Director Jimmy L. Kirby signed both withdrawal notices, which are scheduled for publication in the Federal Register on October 6. The notices reference a report from the President’s Working Group on Digital Asset Markets released in July 2025. Following the news, Coinbase’s stock rose approximately 3% to $188, while Bitcoin’s price slipped slightly, down less than 1% to around $85,690.

FinCEN Drops Its 2023 Plan to Treat Crypto Mixing as a Money Laundering Threat

Crypto mixers, which amalgamate coins from various users and shuffle them, make it difficult for outsiders to trace the movement of funds. In 2023, FinCEN proposed classifying international crypto mixing as “a class of transactions of primary money laundering concern” under Section 311 of the USA PATRIOT Act. This classification would have allowed the Treasury to impose special measures on U.S. financial institutions.

Under that proposal, banks and exchanges would have had to report any mixing-related transactions associated with foreign jurisdictions, including wallet addresses, transaction hashes, and IP addresses, while also maintaining identity records of the involved customers.

The withdrawal notice cites the Working Group report’s emphasis on protecting lawful users’ right to transact privately with digital assets on public blockchains. FinCEN also acknowledged concerns that the expansive definition of mixing could negatively impact legitimate activities.

FinCEN Formally Ends the Self-Custody Wallet Rule Treasury Shelved in 2024

Self-custody wallets are those directly controlled by the owner, with no intermediary like a bank or exchange holding the keys. In December 2020, FinCEN proposed a rule requiring banks and money services businesses to report transactions over $10,000 with these wallets, or multiple transactions totaling over $10,000 within a 24-hour period, and to keep records of transactions above $3,000.

However, this proposal had already been marked as withdrawn as of April 12, 2024. The October 5 notice solidifies the end of this rule, prompting Jason Somensatto of Coin Center to express relief that this chapter is officially closed.

Coin Center, a policy advocacy group that opposed both proposals, has celebrated this development as a major victory for financial privacy. The group also previously campaigned against the sanctions imposed on Tornado Cash, which concluded in July 2025 when the Treasury decided not to continue its legal appeal.

Coinbase and Other Exchanges Still Run the Same Anti-Money-Laundering Checks

In its second-quarter report for 2026, Coinbase reported revenue of $1.22 billion, including $555 million from subscriptions and services. Because FinCEN never finalized either withdrawn proposal, its rescission means exchanges avoid potential future reporting costs rather than eliminating existing obligations.

The existing rules requiring exchanges to carry out anti-money-laundering measures remain unchanged. Under the Bank Secrecy Act, Coinbase must continue performing know-your-customer identity checks, maintaining an anti-money-laundering program, filing suspicious activity reports, and conducting screenings for Office of Foreign Assets Control (OFAC) sanctions. Therefore, customers buying Bitcoin through regulated exchanges will still be subject to the same identity checks after October 5.

While FinCEN has retracted these rules, it has not ruled out future actions concerning mixers. The agency noted that some criminals use mixers to hinder investigations, indicating that it “may take appropriate steps in the future to mitigate any such activity.” Its existing Section 311 authority remains intact, allowing it to take action against specific foreign mixers in the future.

What Does FinCEN’s Withdrawal Mean for Crypto Privacy and Investors?

Overall, the change primarily affects the edges of the regulatory landscape. The withdrawal of the mixing proposal represents a real policy shift, while the formal end of the wallet rule marks a significant moment for privacy advocates. However, most investors who buy Bitcoin or shares in Coinbase will not notice any practical changes since exchanges will continue their current identity-checking practices.

This outcome mainly benefits users of self-custody wallets and privacy-focused services. Nevertheless, with FinCEN holding onto its ability to impose future regulations, the question remains: how long will this victory for crypto privacy truly last?

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