Two self-custody wallet provider announced they would withdraw from the US market and stop servicing local customers. The two providers and wallets are Acinq’s Bitcoin wallet, Phoenix Wallet, and zkSNACKs’ Wasabi Wallet.
Crackdown concerns have spread among crypto entities in the US as two self-custody wallet providers have decided to exit the market.
Acinq said in its official announcement that the company worries that recent crackdowns could force them to register as Money Service Businesses (MSBs), which would impose additional regulations and compliance requirements.
“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 stated.
US Becomes Uncompetitive Market
Acinq’s decision will result in the removal of Phoenix Wallet from the US app stores. The company also urged US users to empty their wallets before May 2.
Meanwhile, zkSNACKs stated that it would implement an IP address block to prevent US users from accessing their websites, including wasabiwallet.io, api.wasabiwallet.io, and zksnacks.com. US users will no longer be able to visit these websites or download the Wasabi Wallet as part of the move.
The ban applies to all US citizens and residents, including permanent residents and passport holders. Unlike Acing’s move, zkSNACKs’ block is effective immediately and will remain in place until further notice, the firm noted.
The exodus comes as a response to increased scrutiny of self-custody cryptocurrency wallets in the US. Specifically, the US Securities and Exchange Commission (SEC) recently threatened legal action against Consensys, the team behind the major Web3 wallet MetaMask.
MetaMask Gets Nailed
According to Consensys, the SEC sent a Wells Notice to the company, a move that signals a potential lawsuit in the near future. In response to the SEC’s notice, Consensys officially took action against the securities agency.
The firm argued that Ether (ETH) is not a security and thus does not fall under securities laws. Consensys maintained that the staking functionality offered by MetaMask doesn’t violate the securities regulations. With all these key points, the firm seeks a court ruling that decides the SEC has no authority over Ether or MetaMask.
Another that came to light this week was the arrest of Samourai Wallet’s founders, Keonne Rodriguez and William Lonergan Hill over alleged money laundering.
Samourai Wallet offers coin mixing services like Whirlpool and Ricochet. These services take a user’s cryptocurrency, combine it with funds from other users, and then send the mixed coins to a new wallet. This process aims to obfuscate the origin of the funds.
The US Department of Justice (DOJ) has indicted the founders of Samourai Wallet. The indictment cites social media posts from the Samourai Wallet account allegedly welcoming Russian oligarchs and disregarding accusations from Europol.
The DOJ’s action has drawn criticism from some cryptocurrency community members. These supporters argue that the Samourai Wallet is a tool with legitimate uses beyond illegal activities. They also believe the government may be overreaching in its pursuit of the founders.
Global Disparity
The intensified crackdown on self-custody wallets in the US has created more frustration and uncertainty among crypto service providers. This approach also contrasts with Europe, where regulations related to self-custody wallets are becoming more relaxed.
The European Parliament has passed a bill requiring stricter measures for cryptocurrency companies. These measures include enhanced due diligence and suspicious activity reporting.
According to Patrick Hansen, Director of EU Strategy & Policy at Circle, the new law shouldn’t affect companies developing software for non-custodial wallets (like MetaMask) as long as they are purely technological and don’t hold user assets. This clarifies that the law targets service providers, not individual wallet software.
However, the bill does restrict the use of anonymity tools within the crypto ecosystem. Crypto service providers cannot list or trade privacy-focused coins like Monero and Zcash while tools that obfuscate transaction history, often used by criminals, are banned.
