Bitcoin wallet Phoenix leaves the United States after FBI announcement

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Key facts: The bitcoiner community reacted mostly with criticism of the government. Service providers with virtual assets must comply with KYC registration, says FBI. Phoenix Wallet, a self-custody wallet based on Bitcoin's Lightning network, will be removed from US app stores on May 3, 2024. The developers of this wallet indicate that users who are in the aforementioned country you should empty your wallet and, to do this, they must enter the “Close channels” option (on Android) or “Drain wallet” (on iOS). They “strongly recommend not forcing the closure of channels.” [de Lightning Network] as on-chain fees could be significant. The event occurs a day after the FBI warned, as BitcoinDynamic reported yesterday, about the use of bitcoin in platforms that did not comply with KYC protocols (know your customer). Due to the lack of precision in regulatory definitions, there is a risk that Lightning wallets, even self-custody ones, fall into this category. ACINQ, developer of Phoenix, wrote in your X account:

“Recent announcements by US authorities cast doubt on whether self-custody wallet providers, Lightning service providers, or even Lightning nodes could be considered money services businesses and regulated as such.” ACINQ, developer of Phoenix Wallet.

«Fear of governments will reverse the trend between developed and developing countries»

Following the announcement, several bitcoiners made comments or questions. For example, developer Peter Todd asked the Phoenix Wallet team: “Are you going to make APKs available?” By doing this, Phoenix would still be available to Americans who install the app directly, even if it cannot be downloaded in mobile app stores. Fellow developer Matt Carvalho asked: “What about defaulting US users to a different LSP? Is that a possibility for the future? The bitcoiner means, by saying that, that Phoenix users are automatically referred to another wallet service provider as a default solution. Alex Thorn, head of research at Galaxy, opined: «Man, it would be great if America remained the land of the free.» And one of the harshest reflections was given by “MAGS”, a specialist who has worked in several Bitcoin technology development companies: “Fear of governments will reverse the trend between developed and developing countries, where we will lose access to free and open banking and “Developing countries will prosper with companies based on Bitcoin.”

Another wallet on Bitcoin's Lightning network had already withdrawn from the US.

In November 2023, Wallet of Satoshi had also made the decision to stop accepting American users. The development team of that application had argued regulatory reasons for leaving the country.

“Our commitment to providing a secure, easy-to-use and globally compliant platform is unwavering. (…) We understand that this news may be disappointing and we share your frustration. «We hope that future developments will allow us to reconsider and possibly resume our operations in the United States.» Wallet of Satoshi.

Unlike Phoenix, Wallet of Satoshi is a custodial wallet, that is, it does not give the user the private keys with which they can manage their funds.