FinCEN withdraws CVC mixing and unhosted wallet proposals
FinCEN has withdrawn its proposed rules on convertible virtual currency mixing special measures and unhosted wallet reporting, removing compliance uncertainty for banks, MSBs and fintechs.
FinCEN announced on October 5 that it is withdrawing two pending proposals outstanding since 2023: a special measure aimed at convertible virtual currency (CVC) mixing services, which would have extended BSA/AML obligations to certain mixing and forwarding activities, and a proposed rule imposing risk-based requirements on financial institutions for transactions involving unhosted wallets. According to the firm alert, the agency weighed public comments and concluded withdrawal was appropriate; the underlying CVC mixer designation and related Treasury actions were not described as being reversed.
Why counsel should care: both proposals sat on bank and fintech compliance roadmaps and shaped product design, customer due diligence, travel-rule implementations, vendor contracting and internal audit scoping for US financial institutions. Their removal narrows anticipated obligations and reduces the case for building wallet-attribute and virtual-currency analytics ahead of a final rule, though it does not disturb existing BSA, CIP, MSB registration or state-level requirements.
What to watch: any replacement proposal, renewed comments or legislation, and how institutions unwind compliance programs, vendor tools and policies built around the withdrawn rules. Reported from a single firm alert; Federal Register notice text and effective date are unconfirmed.