ACINQ’s Phoenix Wallet and zkSNACKs’ Wasabi Wallet have made the strategic decision to cease operations for customers based in the United States. This significant move is a direct response to the recent heightened regulatory scrutiny targeting self-custodial cryptocurrency wallet providers.
The regulatory crackdown has raised substantial concerns within both ACINQ and zkSNACKs regarding the classification of self-custodial wallet providers as legitimate money service businesses. This classification has come under intense scrutiny following regulatory actions taken against other prominent entities in the cryptocurrency space, notably Consensys, the developer of Metamask, and the crypto mixer Samourai Wallet.
In light of these developments, ACINQ and zkSNACKs have opted to discontinue their services for U.S.-based customers, reflecting their apprehension about the evolving regulatory landscape. This decision underscores the challenges faced by cryptocurrency service providers in navigating regulatory compliance while maintaining user privacy and autonomy.
U.S. Users Face Ban by zkSNACKs
In an official statement released on April 27, zkSNACKs unveiled its decision to bar U.S. users from accessing its services, citing recent pronouncements from U.S. authorities as the impetus behind this action.
Likewise, ACINQ elucidated its stance in a post on X dated April 26, highlighting that recent regulatory shifts had prompted profound uncertainties regarding the categorization of self-custodial wallet providers, Lightning service providers, and even Lightning nodes as Money Services Businesses, thereby subjecting them to regulatory oversight.
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 granted Phoenix Wallet users until May 2 to adapt to forthcoming changes, whereas the new policy for Wasabi Wallet was promptly enacted.
ACINQ has advised Phoenix Wallet users to deplete their wallets gradually, cautioning against force-closing them to mitigate the risk of incurring substantial on-chain fees.
The recent regulatory scrutiny surrounding self-custodial wallets arises from concerns regarding their potential facilitation of illicit activities, including money laundering.
On April 10, Consensys, the developer of MetaMask, received a Wells notice from the SEC, indicating the possibility of enforcement actions concerning its MetaMask Swaps and MetaMask Staking offerings. The SEC alleged that Consensys was functioning as an unregistered broker-dealer.
The co-founders of Samourai Wallet have been apprehended.
In a recent development, the co-founders of Samourai Wallet, a notable cryptocurrency mixer, have been arrested on charges of money laundering, as filed by the U.S. Justice Department and other pertinent agencies. Keonne Rodriguez, the CEO, and William Hill, the chief technology officer, find themselves confronted with allegations of conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmitting business.
This incident underscores the intensified scrutiny by the U.S. government on crypto-mixing services. The authorities’ actions extend beyond mere arrests; for instance, the U.S. Treasury has escalated measures by adding Tornado Cash, a prominent crypto mixer, to its Specially Designated Nationals list. This designation effectively prohibits Americans from utilizing the mixer.
The legal saga surrounding cryptocurrency mixers isn’t confined to the U.S. borders. In September 2023, Roman Storm, co-founder of Tornado Cash, entered a plea of not guilty to all charges following his arrest. He was subsequently released on a $2 million bond, albeit with stringent travel restrictions limiting his movement to certain regions within New York, New Jersey, Washington, and California.
Similarly, Bitcoin Fog, a crypto-mixing service reportedly valued at $400 million, saw its founder convicted of money laundering. These legal proceedings illuminate the mounting pressure on entities operating in the cryptocurrency mixing space.
While the regulatory landscape in the United States is becoming increasingly stringent, European regulators have adopted a somewhat different stance. Recently, the lead committees of the European Parliament discarded a proposed limit of 1,000 euros on crypto payments from self-hosted wallets as part of new anti-money laundering laws. However, the obligation for crypto exchanges to conduct due diligence, including identity verification checks, on users engaged in business transactions exceeding 1,000 euros remains unchanged.
