The companies behind these wallets, zkSNACKs and ACINQ, announced the suspension following actions taken by US authorities against similar cryptocurrency services.
zkSNACKs has already implemented measures to block access to its services from US IP addresses, including its Wasabi wallet. ACINQ plans to remove its Phoenix Wallet from app stores in the US by May 3.
The moves reflect the companies’ efforts to comply with potential regulations classifying self-custody wallets as money services businesses, which would impose strict regulatory requirements.
Regulatory pressure on cryptocurrency services has intensified following the arrest of two individuals associated with Samourai Wallet on charges of laundering money from illicit sources, including the Silk Road trading platform. The US government crackdown on Samourai Wallet led to the seizure of its web servers and domain, as well as the removal of the app from the Google Play store in the US.
Why was Wasabi Wallet banned?
Wasabi Wallet is a popular Bitcoin wallet software that is designed to provide privacy and anonymity for transactions. Designed as open-source software, Wasabi Wallet uses CoinJoin technology to mix transactions, making it difficult to track and analyze cash flows.
Wasabi Wallet’s key features include:
- Coin mixing: Wasabi Wallet uses CoinJoin to combine multiple transactions into one by mixing input coins and output addresses. This makes tracing transactions much more difficult for third-party observers.
- Improved privacy: Wasabi Wallet provides a level of privacy that exceeds conventional Bitcoin wallets by utilizing CoinJoin technology and other features such as address masking and protection against protocol attacks.
- Free and open source: Wasabi Wallet is free and open-source software, which means it can be studied, tested and modified by independent developers.
- Multiple language support: Wasabi Wallet is available in multiple languages, making it accessible to users around the world.
- Easy wallet management: Wasabi Wallet offers a simple interface to manage your Bitcoins, including balance tracking, creating new addresses and sending transactions.
- Tor support: Wasabi Wallet supports the use of Tor network, which allows users to connect to the Bitcoin network anonymously and hide their IP address from outside observers.
- Automatic updates: Wasabi Wallet automatically checks and installs updates to provide the best protection and functionality.
Wasabi Wallet has all the hallmarks of a Bitcoin mixer, which is why it has been disgraced in the US.
What’s wrong with Phoenix
Phoenix is a next-generation Bitcoin wallet that makes it easy to send and receive Bitcoins. Bitcoin Lightning Network (LN) is the second layer of the payment system designed to improve scalability and speed of transactions on the Bitcoin network. It was first introduced in 2015 and has been actively developed since then. The basic idea behind LN is to create a network of payment channels between participants that can be used to transfer Bitcoins quickly and cheaply without the need to confirm every transaction on the Bitcoin network.
The wallet has no connection to mixers and it has no anonymization feature. Nevertheless, the developers have decided to leave the US market.
“Recent announcements from US authorities raise doubts about whether self-custody wallet providers, Lightning service providers, or even Lightning nodes can be considered money services businesses and regulated as such,” ACINQ said. “We are removing Phoenix Wallet from US app stores and will evaluate other potential impacts to our operations.”
