ACINQ, the French firm behind Phoenix Wallet, a renowned non-custodial wallet for Bitcoin’s Lightning network, is discontinuing its services in the US. This decision stems from recent regulatory actions in the US that suggest the potential classification and regulation of Lightning nodes as money service businesses.
Two self-custody wallet providers have announced their withdrawal from the US market, ceasing services for local customers. The affected providers and their wallets include Acinq’s Bitcoin wallet, Phoenix Wallet, and zkSNACKs’ Wasabi Wallet.
Growing concerns about regulatory crackdowns within the crypto industry have prompted these actions. Acinq expressed apprehension in its official statement, fearing that recent regulatory actions might compel them to register as Money Service Businesses (MSBs), subjecting them to additional regulations and compliance requirements.
“Recent announcements from US authorities raise doubts about whether self-custodial wallet providers, Lightning service providers, or even Lightning nodes could be classified as Money Services Businesses and subjected to regulatory oversight,” stated Acinq. Consequently, the decision by Acinq will lead to the removal of Phoenix Wallet from US app stores, with the company urging US users to empty their wallets before May 2.
On the other hand, zkSNACKs has announced the implementation of 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 due to this measure.
This exodus from the US market comes amid heightened scrutiny of self-custody cryptocurrency wallets, notably exemplified by the recent legal threats from the US Securities and Exchange Commission (SEC) against Consensys, the team behind the popular Web3 wallet MetaMask.
Furthermore, the arrest of Samourai Wallet’s founders, Keonne Rodriguez and William Lonergan Hill, over alleged money laundering, has added to the industry’s unease. Samourai Wallet offers coin mixing services such as Whirlpool and Ricochet, which aim to obscure the origin of funds. The US Department of Justice (DOJ) indictment of the founders has drawn criticism from cryptocurrency community members, who argue that the wallet has legitimate uses beyond illegal activities.
This regulatory crackdown in the US stands in contrast to Europe, where regulations concerning self-custody wallets are becoming more lenient. Despite the European Parliament passing a bill requiring stricter measures for cryptocurrency companies, it clarifies that companies developing software for non-custodial wallets (like MetaMask) will not be affected as long as they do not hold user assets. However, the bill restricts the use of anonymity tools within the crypto ecosystem, prohibiting the listing or trading of privacy-focused coins like Monero and Zcash, as well as tools that obfuscate transaction history, often used by criminals.
