The cryptocurrency industry is facing a new wave of uncertainty as prominent self-custodial Bitcoin wallet providers, Acinq’s Phoenix Wallet and zkSNACKs’ Wasabi Wallet, have announced their decision to discontinue services for United States customers. The move trails the recent regulatory crackdown on two major players in the self-custodial wallet space, Consensys and Samourai Wallet, raising concerns about the legal status of such providers within the US.
Thank you for reading this post, don't forget to subscribe!The actions taken by US regulatory agencies against Consensys, the creator of the popular Metamask wallet, and Samourai Wallet, a privacy-focused cryptocurrency mixer, have cast doubt on whether self-custodial wallet providers could be considered Money Services Businesses (MSBs) and be subject to stringent regulations.
In an April 27 statement, zkSNACKs, the organization behind the Wasabi Wallet, announced its decision to “strictly prohibit US users from using its services.” The statement cited the “recent announcements by US authorities” as the driving force behind this decision, highlighting the uncertainty surrounding the legal status of self-custodial wallet providers.
Similarly, Acinq, the company behind the Phoenix Wallet, expressed concerns about the potential implications of the recent regulatory actions. In an April 26 post on X (formerly Twitter), Acinq stated, “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.”
Both Acinq and zkSNACKs have taken immediate steps to comply with the new regulatory landscape. Acinq has given Phoenix Wallet users until May 2 to adjust to the upcoming changes, while the new policy at Wasabi Wallet was implemented “effective immediately.”
Acinq has advised Phoenix Wallet users to drain their wallets but cautioned against “force-closing” their wallets due to the potential for significant on-chain fees. This highlights the complexity of navigating the regulatory environment while ensuring the smooth transition of users to alternative solutions.
The withdrawal of these prominent self-custodial wallet providers from the US market has raised concerns about the future of privacy and self-custody in the cryptocurrency space. Self-custodial wallets have long been championed as a means of preserving financial privacy and maintaining control over one’s digital assets, free from the interference of centralized authorities.
However, the recent regulatory scrutiny has cast doubt on the legal status of these services, potentially placing them under the purview of stringent anti-money laundering (AML) and know-your-customer (KYC) regulations designed for traditional financial institutions.
As the regulatory landscape continues to evolve, the cryptocurrency community is grappling with the balance between regulatory compliance and preserving the core principles of decentralization and self-sovereignty. The exit of Acinq and zkSNACKs from the US market serves as a stark reminder of the challenges faced by the industry as it navigates the complex web of global regulations.
