FinCEN withdraws unhosted crypto wallet rulemaking, easing compliance burden

FinCEN has formally withdrawn its 2020 proposed rule that would have required banks and MSBs to collect customer identity and reporting data for transactions involving unhosted or foreign-hosted crypto wallets. The withdrawal ends a years-long regulatory effort, signaling a shift toward lighter-touch crypto oversight. This reduces compliance costs for US financial institutions and may ease pressure on crypto firms, though it leaves AML/CFT gaps unaddressed.