Trump administration withdraws 2020 FinCEN unhosted crypto wallet proposal
In brief
- Trump's second administration formally withdrew a Dec. 18, 2020 Treasury proposal on self-controlled crypto wallets.
- FinCEN's draft would have required reporting on certain transactions over $10,000.
- Transactions above $3,000 would have triggered counterparty name and address recordkeeping.
- Public comment window lasted 15 days, mostly over Christmas and New Year's.
- The proceeding drew thousands of objections and survived the transition to the Biden administration.
What the 2020 rule would have done
The proposal targeted what FinCEN, the Treasury bureau that enforces financial-crime reporting requirements, called "unhosted wallets." Those are wallets whose owners control their own private keys (so they can send or receive crypto without a financial institution authorizing the transaction).
As CryptoSlate summarized FinCEN's proposal, banks and money-services businesses, including covered crypto exchanges, would have had to report certain transactions over $10,000. That included multiple transactions crossing the threshold in aggregate over 24 hours. Anything above $3,000 would've triggered extra recordkeeping, including the name and physical address of the customer's counterparty. Institutions would've had to verify their own customers' identities, but the proposal didn't impose the same mandatory verification on counterparties.
Why Treasury wanted it
The logic came down to a visibility gap. Public blockchains can show when a transaction happened, how much moved and which addresses were involved, but those addresses don't reveal anyone's name or physical location. Once crypto leaves an exchange for a privately controlled wallet, the institution loses control over the person holding it. Treasury's answer was to extend reporting and recordkeeping through the financial institutions handling unhosted-wallet transactions.
The timing was tight. The proposal landed with Christmas a week away and Trump preparing to leave the White House, and the public got just 15 days to comment (most of it over Christmas and New Year's). The government said national security concerns and the growing use of cryptocurrencies in financial crime justified the short window.
A slow exit
It's been a six-year round trip.
The proceeding didn't die quickly. It generated thousands of objections, carried over into the Biden years and appeared as withdrawn in a federal regulatory agenda more than two years before the final withdrawal notice was published, CryptoSlate reported.
both decisions came from administrations led by the same president.
For CryptoSlate, the episode shows how an effort to extend banking rules into crypto turned into a much larger argument about financial privacy.
Frequently asked questions
What is an unhosted wallet?
FinCEN used "unhosted wallets" to mean wallets whose owners control their own private keys. Their owners can send or receive cryptocurrency without a financial institution authorizing the transaction.
What did the 2020 FinCEN unhosted-wallet proposal require?
As CryptoSlate summarized it, banks and money-services businesses, including covered crypto exchanges, would have reported certain transactions over $10,000, including aggregated transactions over 24 hours. Transactions above $3,000 would have required recording the counterparty's name and physical address.
Who withdrew the crypto wallet rule, and when was it proposed?
Steven Mnuchin's Treasury Department announced the proposal on Dec. 18, 2020. Six years later, President Donald Trump's second administration formally withdrew it, according to CryptoSlate.
