Phoenix Wallet Ceases Operations for U.S. Users Amid Regulatory Uncertainty

Phoenix Wallet Ceases Operations for U.S. Users Amid Regulatory Uncertainty

Phoenix Wallet, a Lightning-enabled Bitcoin (BTC) wallet, has announced its decision to halt services for U.S. residents, effective May 3. ACINQ, the company behind Phoenix Wallet, revealed plans to remove the app from U.S. app stores, rendering it inaccessible to users in the country.

The company has advised its U.S. customers to promptly withdraw their funds, cautioning against force-closing wallets to avoid potential higher on-chain fees. Instead, iOS users are instructed to utilize the “drain wallet” feature in the settings page, while Android users are advised to execute the “close channels” command in the settings section to safely empty their wallets.

While ACINQ has not provided an official reason for pulling the wallet from U.S. app stores, a tweet from the company hinted at recent U.S. government statements that have raised concerns about the regulatory status of self-custodial wallets, Lightning service providers, and Lightning nodes.

The announcement comes on the heels of federal prosecutors in the Southern District of New York indicting Samourai Wallet founders Keonne Rodriguez and William Lonergan Hill on April 24. They are accused of facilitating illegal transactions through Samourai Wallet, with Rodriguez facing up to 20 years in prison and Hill facing up to five years if convicted.

The U.S. Department of Justice alleges that Samourai Wallet allowed over $2 billion in unlawful transactions, collecting more than $4.5 million in fees since 2015. The wallet was purportedly marketed as a tool for censorship resistance and facilitating illicit activities.

These indictments have triggered backlash from the crypto community, with CryptoQuant CEO Ki Young Ju defending Rodriguez and Hill, arguing that privacy protection is a fundamental aspect of Bitcoin. Ju compared the situation to punishing the inventor of a knife instead of the one misusing it, emphasizing that the intent behind using a tool determines its legality.

The crackdown on wallets and mixers involved in what authorities deem questionable activities reflects a broader pattern of U.S. regulatory scrutiny in the cryptocurrency space, adding to the uncertainty surrounding the regulatory landscape for crypto-related services in the country.

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