Samourai Wallet matters more than your memecoins

Global authorities are intensifying their war against one of crypto’s core use cases — and no, I don’t mean memecoins. 

Crypto mixers have long been in the regulatory crosshairs for their use by money launderers and other illicit actors. Mixing tech obfuscates the original source of a crypto transaction — anathema to the kind of surveillance conducted by regulators across the world’s financial system. 

Such efforts saw a significant expansion with last week’s arrests and indictment of the co-founders of privacy-focused bitcoin wallet Samourai.

The co-founders, accused of enabling more than $100 million in laundered funds, face decades in prison if convicted. The US Department of Justice, which shut down Samourai’s services and seized its websites, called it “a haven for criminals to engage in large-scale money laundering and sanctions evasion.”

This case is a big deal — so big, in fact, that one wonders whether the crypto community fully appreciates the gravity of what’s been happening. Or where things could go from here: Self-censorship by developers afraid of legal drama, greater centralization of crypto services and the further abandonment of the US as a destination for technology innovation.  

In the past two years, regulators have targeted other mixing services and platforms. Roman Sterlingov, founder of mixing service Bitcoin Fog, was convicted earlier this month on similar charges and faces sentencing in July. 

Tornado Cash, the Ethereum-based mixer, was sanctioned in 2022 and one of its co-founders is currently on trial, with a verdict expected next month.

The Bitcoin network’s founding message referenced looming bailouts for British banks. It was, in a sense, a rejection of the old ways of money and finance and a promise, however tiny at the time of genesis block, of something new. That didn’t mean simply breaking away from entrenched financial interests, but breaking away from centralized parties who have the power to oversee and control transactions.

The war on mixing can be viewed as the inevitable reaction to such efforts. Certain transactions — namely, those tucked out of sight — are undesirable, and governments will spare no expense in prosecuting not only the criminals who use mixing tools, but those that dare to develop them.  

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Developers are taking notice. ZkSNACKs, the developer of Wasabi Wallet, another privacy-centric wallet, announced over the weekend that it would block US residents from its services.

Users, too, are on notice. On April 25, the FBI said that users of crypto-centric unlicensed money transmission businesses “may encounter financial disruptions during law enforcement actions, especially if their cryptocurrency is intermingled with funds obtained through illegal means.”

The notice later put it more bluntly: “Using a service that does not comply with its legal obligations may put you at risk of losing access to funds after law enforcement operations target those businesses.”

The Samourai indictments represent an aggressive warning to services that operate outside the sphere of surveillance — and that’s the point. 

I believe people in crypto should care more about this. Far, far more. 

Public policy is unsexy and not nearly as fun as rolling the dice on the latest memecoin. The bar to actually being able to make a difference in such fights is especially high and, perhaps, not one prioritized by some in the industry. This might be especially true for those whose livelihoods may or may not depend on friendly relations with the US government.  

Regulators, at least recently, appear set on jailing developers for daring to provide resources to those who don’t want every inch of their financial history dissected. Crypto was always intended to be a path for just that — being your own bank, as the saying once went — but the industry’s original intentions were lost in the memecoin circus. Or perhaps the silly speculation was always the point. 

If the FBI notice is any indication, the authorities want you to keep on using the bank — albeit one with a more crypto-friendly face.

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