US financial regulators are delivering sharply mixed signals on cryptocurrency privacy and mixers. On October 6, 2026, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) formally withdrew a 2023 proposal that would have classified international convertible virtual currency mixing as a “class of transactions of primary money laundering concern” under Section 311 of the USA PATRIOT Act. FinCEN also withdrew a separate December 2020 proposal that would have required banks and money services businesses to verify identities and keep records for certain transactions above $3,000 involving unhosted wallets or foreign platforms.
The abandoned mixing plan had been criticized as extremely broad. It would have required covered institutions to file reports when they knew, suspected, or had reason to suspect that a crypto transfer involved mixing. The proposed definition reached pooling funds from multiple users, splitting transfers, using single-use wallets, swapping asset types, and inserting user-initiated delays. Reports would have had to include transaction hashes, wallet addresses, IP addresses, customer identities, and narrative descriptions. FinCEN said it withdrew the measure after public comments warned that the “expansive definition of CVC mixing” could chill legitimate privacy activity and impose heavy reporting burdens. The agency pointed to a July 2025 report from the President’s Working Group on Digital Asset Markets, which supported lawful privacy use on public blockchains while noting that criminals also use mixers.
Industry groups had objected for years: Coin Center called the definition “extraordinarily broad,” and Coinbase highlighted the lack of any dollar threshold in its January 2024 comment letter. FinCEN stressed that the withdrawal does not change existing Bank Secrecy Act obligations, and financial institutions must continue following anti-money-laundering and know-your-customer rules. The regulator said it will keep monitoring mixer activity and may act later if needed.
Despite the regulatory rollback, the criminal case against Tornado Cash co-founder Roman Storm continues. On October 5, federal prosecutors in the Southern District of New York filed new arguments on venue before U.S. District Judge Katherine Polk Failla. Storm, who has been in custody for at least 1,139 days since his arrest, posted the filing on X and wrote: “The DOJ is still coming after me with everything it has. They really want to see me convicted.”
Prosecutors are relying on the September 25 United States v. Sterlingov appeals decision, which held that venue was proper for a mixer operator because transfers to and from the service furthered its ability to launder funds for users and because it served customers in the district. They also cited trial testimony that depositor Shakeeb Ahmed used Tornado Cash from a Manhattan apartment.
Storm was convicted in August 2025 on one count of conspiring to run an unlicensed money transmitting business that moved more than $1 billion in criminal proceeds, which carries up to five years. The jury deadlocked on money laundering and sanctions evasion charges, and a retrial is set for April 26, 2027. A conviction on the two open counts could carry up to 40 years. In August 2025, Acting Assistant Attorney General Matthew Galeotti said the Justice Department acts as prosecutors, not regulators, and would not treat writing code without ill intent as a crime. For now, the regulatory crackdown has been withdrawn, but the criminal case remains very much alive.
