ACINQ’s Phoenix Wallet and zkSNACKs’ Wasabi Wallet have decided to discontinue their services for customers in the United States due to recent regulatory crackdowns on self-custodial cryptocurrency wallet providers. Both companies expressed concerns about the classification of self-custodial wallet providers as legitimate money service businesses following actions taken against other companies like Consensys and Samourai Wallet. ACINQ has given Phoenix Wallet users until May 2 to adjust to the upcoming changes, while Wasabi Wallet’s new policy was implemented immediately. Users are advised 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 alleging that it was operating as an unregistered broker-dealer. Similarly, the co-founders of Samourai Wallet were arrested on charges of money laundering brought by the U.S. Justice Department and other agencies. The crackdown on crypto-mixing services has also intensified, with the US Treasury adding Tornado Cash to its Specially Designated Nationals list, effectively banning Americans from using the mixer. Roman Storm, co-founder of Tornado Cash, pleaded not guilty to all charges and currently faces travel restrictions in certain regions.
The U.S. government’s crackdown on self-custodial wallet providers and crypto mixers is part of a broader trend towards stricter regulation in the cryptocurrency industry. While European regulators have taken a slightly different approach, recently scrapping a proposed 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. This divergence in regulatory approaches between the U.S. and Europe reflects the global challenge of balancing innovation with the need to prevent illicit activities in the cryptocurrency space.
The restrictions imposed on Phoenix Wallet and Wasabi Wallet by ACINQ and zkSNACKs highlight the challenges faced by self-custodial wallet providers in navigating the evolving regulatory landscape. By discontinuing services for users in the U.S., these companies are proactively responding to regulatory uncertainties and potential enforcement actions that could impact their operations. The crackdown on self-custodial wallets and crypto mixers in the U.S. underscores the importance of compliance with existing regulations and the need for companies in the cryptocurrency industry to stay informed about changes in the regulatory environment.
The actions taken by ACINQ and zkSNACKs to ban U.S. users from their services also serve as a reminder of the broader implications of regulatory crackdowns on the cryptocurrency ecosystem. As authorities around the world continue to tighten regulations on digital assets, companies in the industry are faced with increasing scrutiny and potential legal risks. The enforcement actions taken against Consensys, Samourai Wallet, and other firms signal the growing enforcement efforts aimed at ensuring compliance with anti-money laundering and securities laws in the cryptocurrency space. Faced with these challenges, self-custodial wallet providers and other cryptocurrency businesses must navigate regulatory uncertainties while seeking to innovate and provide valuable services to users globally.
