zkSNACKs and ACINQ, the creators of Wasabi Wallet and Phoenix Wallet respectively, have made the decision to stop offering their services to customers in the United States. This move comes in response to the recent crackdown on self-custodial cryptocurrency wallet providers by regulatory agencies. Both companies have expressed concerns about the classification of self-custodial wallet providers as legitimate money service businesses, following actions taken against other companies in the industry.
zkSNACKs made an official announcement on April 27, stating that it would prohibit U.S. users from using its services due to recent announcements by U.S. authorities. Similarly, ACINQ explained in a post on April 26 that recent regulatory developments have raised doubts about the classification of self-custodial wallet providers, Lightning service providers, and Lightning nodes as Money Services Businesses.
ACINQ has given Phoenix Wallet users until May 2 to adjust to the upcoming changes, while Wasabi Wallet’s new policy was implemented immediately. ACINQ advised Phoenix Wallet users to empty their wallets without force-closing them in order to avoid high on-chain fees.
The recent focus on self-custodial wallets by regulators is due to concerns that these wallets may enable illicit activities such as money laundering. Consensys, the creator of MetaMask, received a notice from the SEC on April 10, warning of potential enforcement actions related to its MetaMask Swaps and MetaMask Staking 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 U.S. government has also been cracking down on crypto-mixing services. Tornado Cash, a prominent crypto mixer, has been added to the US Treasury’s Specially Designated Nationals list, effectively banning Americans from using it. Similarly, the founder of Bitcoin Fog, a $400 million crypto-mixing service, was convicted of money laundering.
While the regulatory landscape in the U.S. has become more stringent, European regulators have taken a slightly different approach. The European Parliament recently scrapped 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 and identity verification checks on users conducting business transactions of at least 1,000 euros.
