• FinCEN withdrew two never-finalized proposals: the October 2023 Section 311 mixing finding and the December 2020 unhosted-wallet rule.
• FinCEN's stated reason was the risk of a chilling effect on legitimate activity, per The Block's reporting.
• Nothing was in force, so banks and money services businesses gain no new obligation and lose none.
• AML teams should keep risk-based controls on mixer exposure, because the withdrawal removes a prospective mandate rather than an existing expectation.
• The move follows Treasury's March 2025 delisting of Tornado Cash, which suggests a consistent policy direction rather than a one-off reversal.

FinCEN has withdrawn two crypto proposals that sat unfinished for years, according to The Block's 5 October 2026 report: the October 2023 finding that international crypto mixing is a class of transactions of primary money laundering concern, and a December 2020 plan to impose identity and recordkeeping duties on transfers involving unhosted wallets. The practical effect is narrow, since neither became binding. The policy signal is wider, because it shows how the U.S. now balances privacy tooling against illicit-finance controls.

What was withdrawn, and what it would have required

The 2023 proposal was drafted under Section 311 of the USA PATRIOT Act and was, per The Block, the first attempt to use that authority against a class of transactions rather than a named institution or jurisdiction. FinCEN announced it on 19 October 2023, and it appeared in the Federal Register on 23 October 2023. The 2020 proposal would have required banks and money services businesses to verify customers and keep records on unhosted-wallet transactions above $3,000.

Why FinCEN says it backed away

FinCEN's stated reason, as reported by The Block, is that the mixing rule's broad definition risked a chilling effect on legitimate activity and would have imposed substantial compliance burdens. The agency also referenced the July 2025 Presidential Working Group report, which acknowledged that lawful users of digital assets may use mixers for financial privacy. That is an admission that mixing is dual-use, which a class-wide designation could not accommodate.

Policy direction: a consistent loosening, not a one-off

The withdrawal fits a sequence The Block describes. Treasury removed Tornado Cash from sanctions in March 2025 after court challenges to OFAC's authority, and a March 2026 Treasury report to Congress acknowledged legitimate privacy uses of mixers. Read together, these suggest the government is moving from blanket restrictions on privacy infrastructure toward targeting identified illicit actors. That is an inference from the reported sequence, not a stated FinCEN doctrine.

What this means for compliance teams

No new obligation arrives and none disappears, so existing AML programs, suspicious activity reporting and sanctions screening remain the operative standard. The practical takeaway is to keep risk-based handling of mixer-linked flows, such as enhanced review of counterparties with heavy mixer exposure, rather than to treat the withdrawal as clearance. A Section 311 action could still be pursued later, narrower and aimed at specific illicit operators. Watch for any replacement proposal and for state or non-U.S. regulators acting differently.