Wasabi Wallet and Phoenix Suspend US Operations Amid Regulatory Crackdown

In response to mounting regulatory pressure, Wasabi Wallet and Phoenix have ceased operations for customers in the United States. The suspensions follow recent actions by U.S. authorities against cryptocurrency services, intensifying the crackdown on self-custody wallets in the wake of the arrest of two individuals associated with Samourai Wallet on charges of money laundering.

Regulatory Pressures Prompt Wasabi Wallet and Phoenix Suspensions in United States

In response to escalating regulatory scrutiny, Wasabi Wallet and Phoenix have ceased operations for customers within the United States. The companies behind these wallets, zkSNACKs and ACINQ, respectively, announced the suspensions following recent enforcement actions by U.S. authorities against similar cryptocurrency services.

Proactive Measures to Safeguard Compliance

zkSNACKs has implemented preemptive measures to restrict access to its services from U.S. IP addresses, including Wasabi Wallet. The company aims to mitigate the risk of violating potential regulations that could classify self-custody wallets as money services businesses (MSBs), which would subject them to stringent regulatory oversight.

Withdrawal from U.S. App Stores

ACINQ plans to remove Phoenix Wallet from U.S. application stores by May 3rd, 2023. This decision aligns with the company's intention to comply with impending regulations and avoid any potential legal exposure.

Heightened Enforcement Actions

The regulatory crackdown on cryptocurrency services has intensified in recent months following the arrest of two individuals associated with Samourai Wallet on charges of money laundering, including allegations of processing illicit funds derived from the Silk Road marketplace.

Government Seizures and Arrests

The U.S. government's enforcement actions against Samourai Wallet resulted in the seizure of its web servers, domain, and the removal of its app from the Google Play Store in the United States.

Bail Granted to Samourai Co-Founder

Keonne Rodriguez, co-founder of Samourai Wallet, was granted release on a US$1 million bond after pleading not guilty to charges of money laundering and operating an unlicensed money-transmitting business at the U.S. District Court for the Southern District of New York.

Implications for Self-Custody Wallets

The regulatory pressure on cryptocurrency services raises concerns about the potential classification of self-custody wallets as MSBs. Such a designation would impose significant regulatory burdens on these services, including Know-Your-Customer (KYC) requirements and anti-money laundering (AML) compliance measures.

Industry Reaction

The cryptocurrency industry has expressed concerns about the government's approach to regulating self-custody wallets. Critics argue that such regulations could stifle innovation and hinder the development of decentralized financial technologies.

Uncertain Future

The regulatory landscape for cryptocurrency services remains uncertain, as U.S. authorities continue to grapple with the challenges of balancing consumer protection and the promotion of financial innovation. The impact of these regulations on self-custody wallets and the broader cryptocurrency ecosystem is yet to be fully understood.