The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has withdrawn its proposal presented back in 2020. The proposal had introduced additional reporting, recordkeeping and customer verification requirements for certain cryptocurrency transactions involving unhosted wallets.

According to an official notice in the Federal Register, 2026, FinCEN will take no further action on the proposed rule. The agency now says the withdrawal is aligned with the Trump administration’s efforts to ensure that digital asset regulations remain “fit-for-purpose.”

FinCEN Drops 2020 Unhosted Wallet Proposal

FinCEN originally published the proposed rule on December 23, 2020. It wanted to establish additional obligations for banks and money services businesses (MSBs) handling transactions involving convertible virtual currency (CVC) or digital assets with legal tender status held in certain unhosted wallets. Unhosted crypto wallets are not controlled or managed by a third-party financial institution or crypto service. They are also commonly known as self-custody wallets.

Under the proposed rule, an unhosted wallet meant a crypto wallet controlled by the user rather than a financial company. The rule also covered some wallets managed by foreign financial companies that were not required to follow US AML.

The agency has now formally withdrawn the notice of proposed rulemaking ending further action on the 2020 proposal.

Proposed Rules Included $10,000 Reporting Threshold

The withdrawn proposal would have required banks and MSBs to submit reports to FinCEN if a user transacted $10,000 or more using an unhosted wallet. Meanwhile, they were also reqired to maintain records of all transactions exceeding $3,000.

FinCEN said the withdrawal follows recommendations included in a report from the President’s Working Group on Digital Asset Markets. The move represents a significant change in the regulatory approach of Washington to self-hosted crypto wallets.