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Why are Bitcoin wallets abandoning the US?

by Patricia

Bitcoin wallets Wasabi Wallet and Phoenix Wallet have announced that they will soon no longer be available to US residents. What’s going on?

Bitcoin wallets are leaving the US

Wasabi Wallet and Phoenix Wallet, 2 wallets dedicated to Bitcoin, recently announced that US residents would soon no longer have access to their services, and won’t even be able to visit their websites.

The reason? Regulatory pressure in the U.S. regarding cryptocurrencies, exerted by both the Securities and Exchange Commission (SEC) and various regulatory agencies. The 2 co-founders of Samouraï Wallet, Keonne Rodriguez and William Lonergan Hill, recently paid the price.

Just a few days ago, they were arrested on charges of conspiracy to launder money and operating an unlicensed money transfer business. Alongside the facts relating directly to Samurai Wallet, the individuals are also accused of enabling the laundering of over $2 billion via their Whirlpool cryptocurrency mixer.

As we know, cryptocurrency mixers are now a priority target for the US authorities, as witnessed by the arrest of Alexey Pertsev, the co-founder of Tornado Cash, in August 2023. The latter is accused of having enabled the laundering of $1.2 billion, part of which came from the Ronin sidechain hack – the largest in cryptocurrency history in terms of the amount stolen.

When it comes to open-source cryptocurrency mixers, the question has long been whether it’s the person who wrote the computer code who should be charged in the event of its fraudulent use, or whether it’s the individuals who make illicit use of it.

In a 111-page document recently filed with the courts, U.S. prosecutors ruled: “The indictment clearly alleges that the Tornado Cash service was a commercial enterprise operated for profit or financial gain, and that the defendant himself profited from its operation by controlling, along with others, key elements of the integrated Tornado Cash service. “

Finally too much regulation in the US?

ACINQ, the firm behind Phoenix Wallet, which relies on the Lightning Network, clearly pointed the finger at the regulatory doubt in the U.S. regarding its decision, indicating that it would soon communicate on the “potential impacts” of the latter.

According to the company, it could even be that, in the long term, simply owning a node on the Lightning Network could be considered a professional activity, and thus become subject to de facto regulation.

“Recent announcements by U.S. authorities cast doubt on whether self custodial wallet providers, Lightning service providers or even Lightning nodes could be considered money service businesses and regulated as such. “

The same is true of Wasabi Wallet, which spoke through the voice of its parent company zkSNACKs in a statement dated April 27.

But cryptocurrency mixers and Bitcoin wallets aren’t the only potential targets: Consensys, the parent company of the MetaMask wallet, was recently accused by the SEC of operating as an unregistered broker, particularly in relation to its MetaMask Swaps and MetaMask Staking products.

In parallel, the FBI issued a statement within 24 hours of the arrest of the 2 co-founders of Samurai Wallet to warn individuals who might wish to use cryptocurrency-related applications not requiring KYC.

The war waged by U.S. regulators against the various operators of crypto services therefore shows no signs of ending. The question is whether the few voices that have been raised against the US powers-that-be, notably Coinbase and more recently Consensys, will manage to be heard.

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