The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced the withdrawal of two proposed rules that would have affected digital asset companies’ compliance obligations. One concerned convertible virtual currency mixing, while the other applied to unhosted wallets.

According to a notice issued on Monday, the first rule stemmed from a proposal introduced in December 2020 that would have imposed recordkeeping, verification, and reporting requirements on transactions involving digital currencies and unhosted wallets. The second rule, proposed in October 2023, targeted digital currency mixing services.

FinCEN said the mixing rule could have had a chilling effect on legitimate activity, while imposing a significant reporting burden on regulated financial institutions. It added that the decision to withdraw the proposals followed a review of the comments received and was part of the Trump administration’s agenda to reduce regulatory restrictions, while continuing efforts to ensure that digital asset regulations are fit for purpose.

What does this mean for businesses?

For businesses that had been preparing for additional compliance requirements, this development eases anticipated regulatory pressure on activities related to unhosted wallets and mixing services. It also changes, at least for now, the internal planning of institutions that had been reviewing their reporting and verification systems in anticipation of the proposed rules taking effect.

This move is part of a series of regulatory steps tied to the current U.S. administration’s agenda for the cryptocurrency sector. Earlier that same day, Commodity Futures Trading Commission Chair Michael Selig announced that the commission is using its existing statutory authority to propose two rules on how crypto companies operate under its oversight, without needing additional authority from Congress.

Industry advocates welcome the move

Advocacy groups for the crypto and blockchain sectors welcomed the withdrawal of the two rules, calling it a positive step for the digital asset ecosystem. The Crypto Council for Innovation said in a post on X that the decision was a positive development for the sector.

Although the withdrawal does not end the regulatory debate over currency mixing or unhosted wallets, for now it removes a burden that could have imposed broader compliance requirements on financial institutions and companies operating in this field.

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