Self-custody wallet providers leaving US market amid regulatory concerns 😱

US Self-Custody Wallet Providers Exit Market

Two self-custody wallet providers, Acinq’s Bitcoin wallet, Phoenix Wallet, and zkSNACKs’ Wasabi Wallet, have announced their withdrawal from the US market. This decision comes as concerns over crackdowns in the country have escalated.

Acinq expressed worries that recent regulatory actions could require them to register as Money Service Businesses (MSBs), subjecting them to 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.

Acinq’s Decision and Phoenix Wallet Removal

Acinq will remove Phoenix Wallet from US app stores.
US users are urged to empty their wallets before May 2.

zkSNACKs’ IP Address Block

zkSNACKs will implement an IP address block to prevent US users from accessing their websites.
US users will no longer be able to access wasabiwallet.io, api.wasabiwallet.io, and zksnacks.com.
This ban applies to all US citizens, residents, permanent residents, and passport holders.
The block is effective immediately and will remain until further notice.

Increased US Regulatory Scrutiny

The crackdown on self-custody cryptocurrency wallets in the US has prompted these providers to take action. Additionally, the SEC’s threat of legal action against Consensys, the team behind MetaMask, has added to the regulatory pressure in the country.

MetaMask and Ether Security Debate

Consensys received a Wells Notice from the SEC, signaling a possible lawsuit.
The firm argues that Ether is not a security and MetaMask’s staking functionality complies with regulations.
Consensys seeks a court ruling affirming the SEC has no authority over Ether or MetaMask.

Arrest of Samourai Wallet Founders

Founders of Samourai Wallet were arrested for alleged money laundering.
The wallet offers coin mixing services to obfuscate fund origins.
The DOJ indictment cites social media posts from the wallet’s account.

Global Regulatory Variances

While the US tightens regulations on self-custody wallets, Europe is moving towards more relaxed rules for such services. The European Parliament has passed a bill imposing stricter measures on cryptocurrency companies, including enhanced due diligence and reporting of suspicious activities.

Impact on Anonymity Tools

The new European law restricts the use of anonymity tools in the crypto space.
Service providers cannot list or trade privacy-focused coins like Monero and Zcash.
Tools that obscure transaction history, often used by criminals, are also banned.

Hot Take: Reflections on the US Crypto Landscape

As regulatory pressures increase in the US, self-custody wallet providers are facing tough decisions. The crackdown on these services reflects a broader trend of heightened scrutiny in the country’s crypto sector. Meanwhile, the divergent approaches between the US and Europe underscore the global regulatory disparities impacting the industry.