ACINQ’s Phoenix Wallet and zkSNACKs’ Wasabi Wallet have announced their decision to discontinue their services for customers in the United States in response to the recent crackdown on self-custodial cryptocurrency wallet providers by regulatory agencies. The move by both companies comes in light of 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 announced the ban on US users on April 27, while ACINQ announced it on April 26, with Phoenix Wallet users having until May 2 to adjust to the upcoming changes.
The recent regulatory focus on self-custodial wallets stems from concerns that they may facilitate illicit activities such as money laundering. Consensys received a Wells notice from the SEC on April 10, warning of potential enforcement actions related to its MetaMask products. The SEC alleged that Consensys was operating as an unregistered broker-dealer. 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. The crackdown on crypto-mixing services has also seen Tornado Cash being added to the US Treasury’s Specially Designated Nationals list, effectively banning Americans from using it.
European regulators have taken a slightly different approach as compared to the US. 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. While the US regulatory landscape has become more stringent with crackdowns on self-custodial wallets and crypto mixing services, European regulators seem to be adopting a more lenient approach.
The situation has forced self-custodial wallet providers like ACINQ and zkSNACKs to make tough decisions to discontinue their services for US customers to avoid potential regulatory scrutiny. Companies in the cryptocurrency sector are facing increased pressure and regulatory challenges as authorities crack down on activities perceived as facilitating illicit financial transactions. The recent actions against Consensys and Samourai Wallet, as well as the ban on Tornado Cash, signal a growing trend of regulatory enforcement in the cryptocurrency space, both in the US and globally.
The crackdown on self-custodial wallets and crypto mixing services highlights the ongoing debate around the regulation of cryptocurrencies and the measures taken by authorities to combat money laundering and other illicit financial activities. The actions taken by regulatory agencies against companies like Consensys, Samourai Wallet, and Tornado Cash demonstrate the challenges faced by cryptocurrency businesses in navigating the complex and evolving regulatory landscape. As the regulatory environment continues to evolve, companies in the cryptocurrency sector will need to adapt and comply with regulatory requirements to ensure their long-term viability and sustainability.
