Wallets and coinjoin services abandon the American market: is the US government ready to attack self-custody?
On April 24, the United States Department of Justice announced the arrest of the two founders of the privacy-focused Bitcoin wallet, Samourai Wallet. CEO Keonne Rodriguez and CTO William Hill were charged with operating without the necessary licenses from Money Services Business and facilitating the laundering of over $100 million from criminal activities. The two face a maximum sentence of 25 years in prison.
The following day, the FBI issued a warning advising American citizens not to use services lacking licenses from Money Services Business. According to the US government, all services indirectly involved in the transmission of value that do not comply with legal requirements such as Know Your Customer (KYC) standards and Anti-Money Laundering (AML) procedures fall into the category of Money Services Business.
The FBI announcement has caused several consequences: on April 26, the company Acinq announced that its Lightning Network wallet, Phoenix, will cease operations for residents in the United States starting from May 3. The application will be removed from both the App Store and the Google Play Store. It is unclear if the .apk file available on GitHub will remain available.
The decision by the French company has sparked reactions from the Bitcoin community. X. Jack Dorsey, CEO of Block, commented:
Other users, on the other hand, have understood the decision. Francis Pouliot, CEO of Bull Bitcoin, stated:
On April 26th, the United States Department of Justice rejected the proposal to dismiss charges from the legal team of Roman Storm, co-founder of Tornado Cash. This decision came through a 111-page document. Storm was arrested last August on charges of money laundering and conspiracy, and he is currently out on bail.
In the chapter titled “The FinCEN Guidance Does Not Suggest That Control of Funds is Required,” the document refers to the guidelines issued by FinCEN in 2019 regarding the classification of an activity as a Money Services Business. In particular, FinCEN stated:
“Certain activities are excluded from the definition of ‘money transmitter.’ Specifically, a person is not considered a money transmitter if that person:
a) provides delivery, communication, or network access services used by a money transmitter to support money transmission services;”
However, in the document presented in the Tornado Cash case, lawyer Damian Williams stated that the guidelines established by FinCEN in 2019 not only do not support Storm’s defense thesis but refute his argument and clarify that neither the law nor the regulations require the company to have control of the funds to be considered a Money Services Business.
The lawyer refers to Section 1960 of Title 18 of the United States Code, which states that the definition of “money transmitter” does not require the money transmitter to have “control” of the funds being transferred. To explain this concept, lawyer Williams makes a rather bizarre comparison, writing:
“For example, a USB cable transfers data from one device to another, and a frying pan transfers heat from a stove to the contents of the pan, even though in both situations there is no ‘control’ over what is being transferred.”
Following these events, on April 27th, through a statement on its own blog, zkSNACKs, the company behind the development of the privacy-focused Bitcoin wallet Wasabi Wallet, which was the main competitor of Samourai until a few days ago, announced the ban on the use of its software for US citizens and residents in the United States. The company will block access to the website for them, thus the presumed possibility of downloading and using Wasabi Wallet and all related products and services, including APIs and RPC interfaces, will be prevented (don’t tell the US that VPNs exist). Again, it is not clear if the software will remain available on GitHub.
