ACINQ’s Phoenix Wallet and zkSNACKs’ Wasabi Wallet have decided to discontinue their services for customers in the United States.
The move comes as a response to the recent crackdown on self-custodial cryptocurrency wallet providers by regulatory agencies.
Both companies have expressed concerns about the classification of self-custodial wallet providers as legitimate money service businesses, following actions taken against Consensys, the creator of Metamask, and crypto mixer Samourai Wallet.
zkSNACKs Bans U.S. Users
In an official statement on April 27, zkSNACKs announced that it would prohibit U.S. users from utilizing its services due to recent announcements by U.S. authorities.
Similarly, ACINQ explained in a post on X on April 26 that recent regulatory developments raised doubts about whether self-custodial wallet providers, Lightning service providers, or even Lightning nodes could be considered Money Services Businesses and subjected to regulation.
Recent announcements from US authorities cast a doubt on whether self-custodial wallet providers, Lightning service providers, or even Lightning nodes could be considered Money Services Businesses and be regulated as such.
— ACINQ (@acinq_co) April 26, 2024
ACINQ has given Phoenix Wallet users until May 2 to adjust to the upcoming changes, while Wasabi Wallet’s new policy was implemented immediately.
ACINQ advised Phoenix Wallet users to drain their wallets without force-closing them to avoid significant on-chain fees.
The recent regulatory focus on self-custodial wallets stems from concerns that they may facilitate illicit activities such as money laundering.
Consensys, the creator of MetaMask, received a Wells notice from the SEC on April 10, which warned of potential enforcement actions related to its MetaMask Swaps and MetaMask Staking products.
The SEC alleged that Consensys was operating as an unregistered broker-dealer.
Samourai Wallet Co-Founders Arrested
In another incident, the co-founders of Samourai Wallet, a cryptocurrency mixer, were arrested on charges of money laundering brought by the U.S. Justice Department and other agencies.
Samourai Wallet CEO Keonne Rodriguez and chief technology officer William Hill are facing charges of conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmitting business.
The U.S. government has also been cracking down on crypto-mixing services.
As reported, the US Treasury has added Tornado Cash, a prominent crypto mixer, to its Specially Designated Nationals list, effectively banning Americans from using this mixer.
In September 2023, Roman Storm, co-founder of the cryptocurrency mixer Tornado Cash, pleaded not guilty to all charges and was released on a $2 million bond shortly after his arrest.
He currently faces travel restrictions, confining him to certain regions of New York, New Jersey, Washington, and California.
Likewise, the founder of Bitcoin Fog, a $400 million crypto-mixing service, was convicted of money laundering.
While the U.S. regulatory landscape has become more stringent, European regulators have taken a slightly different approach.
The European Parliament’s lead committees recently scrapped a proposed 1,000 euro limit on crypto payments from self-hosted wallets as part of new anti-money laundering laws.
However, crypto exchanges are still required to perform due diligence, including identity verification checks, on users conducting business transactions of at least 1,000 euros.
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