Topic: Why is United States going against custodial lightning wallets? (Read 358 times)

They are targeted for the same reason unregistered centralized exchanges are targeted. They're non-licensed money transmitting services. Like, real money transmitters, not like the recent vague definition which can treat even this forum a money transmitter. For example, if you deposit lightning bitcoin in Wallet of Satoshi, they hold custody of your coins, and are therefore subjected to regulations.

With the recent turn of events in the US, expect a lot more than custodial lightning wallet providers to shut down within the next few years.

Probably, this is another case of some money laundering charges. The issue here is we cannot deny this fact as well that even though an exchange/wallet might not be included in this money laundering, people have been finding loopholes and continuing to do these kinds of actions. Here neither the government nor the exchange owners can do anything.
However, as I do not reside in the US, we cannot be sure of anything just by reading the news media. We all know, how manipulative media is nowadays.

As a few said, I also think that the US and everybody wants to regulate Bitcoin and the crypto market. But I doubt the US will be falsely accusing somebody of doing that because this does not make any sense. Now, when the non-custodial wallet case is added, all of this turns doubtful. Again, Exodus is running and working fine as much as I heard from some online friends and Exodus is a non-custodial.

Something is cooking but I guess as of now nobody knows what exactly it is. Everything is confusing and some information and facts are itself contradictory.

I don't know how true this is but I just get a information that even Trust wallet is no more available on Play store for U.S citizens, since I am not in the US I can't verify if this is true or not, it seems that Playstore just decide to do this on their own, because trust wallet has no privacy transaction or lightening features.

What is going on? Can anyone from the US verify this claim?

Not sure if that is the idea since if that was the case they could just ban bitcoin outright and make all of the banks and large-scale investment firms pull out on their ETFs, way easier that way than actually banning self-custodial wallets. And as much as I hate to say it I think the intent of the US here is to crackdown on hackers who may have used these types of wallets to keep their stolen crypto like a dragon inside a tower keeping their treasures for themselves lol.

I could be wrong about this idea though, but honestly this is just what makes the most sense to me at this point. In the Philippines even exchanges such as Binance are getting the ban hammer and are being pulled out of the App Store and Google Play Store so Filipinos wouldn't be able to access them, they say it's to stop people from getting their dirty paws on these types of exchanges and risking getting hacked and scammed, but frankly enough I think it's just because they can't find a way to profit off of crypto so they are banning it before it becomes an even bigger financial and legal threat.

Im not sure if this was related issue but today trustwallet has been removed too on Google. News circulate on social media that the big project Truswallet was taken down on Google. Too many wallets has been flagged lately. Was US that scared of crypto?

You do understand that nobody is going right now after Phoenix/ACINQ, right?
Nobody asked them to remove the apps from the store, nobody has issued a warning to ACINQ, nobody but themselves has taken a decision, and that was to protect in case of ...whatever! No US agency has gone after a LN wallet, yet!

This whole thing is just for their own company protection, any US citizen could easily use their service, they just want to claim they have done everything possible to restrict them, but overall nothing has changed.
Just as you can't stop anyone from still using Tornado ACINQ can't stop a US citizen from routing payments through their nodes.

its not so much about the custody. regulators do treat 'services that facilitate the movement of funds on behalf of others for a fee' as a MSB. in short LN routing requires a MSB licence to perform LN routing

the method LN makes payments over a network via using partners liquidity in a pass-the-parcel IOU game in LN, is different to how bitcoin relays unconfirmed transactions on the bitcoin network.. this difference is and will cause headaches for LN users wanting to move funds(route) for a fee

its not just certain wallets but the whole method the LN system operates
the only way LN can succeed even as a niche sub service, is if people self custody lock their bitcoin value on the bitcoin network. and then set up a channel referencing such lock, where the channel is direct to intended destination for their payments.. to not need to utilise the 'gossip' routing table data(avoid middlemen(avoid routing) unless they want to pay higher admin fee)
in short: routing will add costs to LN fee making it expensive to route due to fee's needed to cover MSB regulated admin costs of a service offering routing.

this means people using LN will end up having to pre-plan months of potential spends to set up many channels direct with their favoured services using multiple channels...
in short they might aswell just set up multisigs with intended recipients on the bitcoin network and use a new private communication method to RBF unconfirmed transactions (emphasis privately) between each other(update states).. and just broadcast final settlements when one side of the multisigs funds are depleted thus need to settle to finalise the funds owed

How can the US  support something that they can't monitor at least? They can't control Bitcoin, but they can monitor when Bitcoin transactions are made on the blockchain. They hate mixers too because they can't trace Bitcoin perfectly. So they blamed them for money laundering and started attacking them. Since they can't monitor data on the blockchain about Lightning wallet transactions and their custodial means, funds are ultimately mixing together as well. Most probably, that's the reason the US is against the lightning network. I am not sure if there is any other secret mission behind it. 

Perhaps they will go after the GitHub profile with its repositories as well and have it banned, like they did with Tornado Cash. Those GitHub chaps are cowards too, if that's the correct wording. Maybe they could host the files on decentralized alternative platforms to GitHub, but it will certainly reduce their popularity by miles.

This is true. Because an app is removed from those app stores, that does not mean they have stopped operation. Which means those that have the app already can still continue to use it, while those that still want to use it can download it from their GitHub through the link you give. It is not as centralized as I thought, it is better to have the apk on GitHub.

But there are some people that will not know this but be afraid of their bitcoin not to get lost. Many of them will not know about Phoenix on GitHub. This may likely reduce United States Phoenix wallet users.

How?
What would stop a US citizen to go here:
https://github.com/ACINQ/phoenix/releases
download the apk and run it?

Phoenix is still providing services to US customers. The lightning wallet provider will cease to provide services to US people on May 3.

I just checked the wallet just now because of the argument and I discovered that Phoenix wallet is purely non custodial wallet which also open source. And why I know that it is a non custodial wallet because after downloading the wallet app. I clicked "create new wallet" and as I clicked, straight to the interface of the wallet with the option of receive and send and I clicked on the receive the the public key was shown to me.

And on the home page of the wallet I clicked on setting, then clicked again on recover seed. And the seed phrase display on the screen. Therefore there is no argument here again it is purely a non custodial wallet.
And look at the app on my phone desktop.

The united states have done nothing against Phoenix or ACINQ!
They haven't taken anything down, you can see that even their LN channels are still working in the US being hosted in the US.
https://mempool.space/lightning/node/03864ef025fde8fb587d989186ce6a4a186895ee44a926bfc370e2c366597a3f8f


ACINQ, owners of Phoenix have explained that themselves:


ACINQ has no MSB license, if the government identifies them as MSB they don't want to risk operating without one, so they are pulling out before they acquire one!

United States has been very aggressive against crypto platforms and that's the reason why most crypto platforms want to exit the US market so they could be safe from the sanctions that they might get if they continue providing their services to US citizens.

That means the only platforms will remain working in US who completely agree with the rules of the United States. The ones who doesn't follow the rules and regulations of the US will either get seized or they'll get penalties.

I am not so familiar with the lightning network. One time I wanted to get accustomed to it, then I realized that one had to open and close channels which  could be costly or something along those lines. I gave up

Could it be that the rest of the wallet is noncustodial, but then the part that has lightning network integration is custodial to some degree?

I'll put them somewhere in the middle. They claim to be non custodial on their website and have done so for many years, but to function as a lightening network wallet they do have some levels of custody.

They are non-custodial wallet and open source, their lightning node is also considered as non-custodial.

Seems like it, and also precautions to avoid getting sued, get a warrant, and any worst outcome to their service. Which is really absurd decision for the US government for being ignorant of what the lightning technology is.

This isn't their first attempt on Bitcoin network to see that every other elements attached to it have been crippled before the main launch of attack on the bitcoin itself, since they cannot achieve regulating the network, all they feels like doing are these, whereas I expect them to be the highest users to keep encouraging others to continue with the use and adoption of bitcoin globally, we shouldn't care much about them or the raging attacks they are mounting because everything will soon fade as it doesn't work effectively on a decentralized network.

Most probably they won't holders to sell for the institution's Bitcoin ETF custodian. It's just Coinbase has the right to hold their BTC all the rest are illegal.

Seem ahead of time but this is going to end up in confiscating their BTC since those users who submitted KYC can be tracked and they will find these users and take their BTC. No kidding, lol it could happen. But of course, it will be like offering the holders a price for selling the BTC.

I won't be surprised if US will be taking down or bringing regulations for every crypto address should be connected with the KYC because they're not interested in people having privacy and the reason they say is money laundering but they're afraid of tax revenue cuts or decentralised monetary system started taking the path they didn't expect at all.

Not only the US government, I believe that other governments will also imitate and follow what the US government is doing because no government wants to lose control of its citizens. The more decentralization and privacy spread, the more governments will tighten things up and even ban and eliminate anything they think will harm them. 

America was once considered the country with the best human rights in the world, where an ordinary citizen could sue the president but no one dared to speak out against what the government was doing. It can be seen that ultimately neither privacy nor decentralization can escape government.

The answer to the question is really simple: if you are not licensed by the US government, they don't want you to operate anything that can transmit money around, since crypto currency has been generally accepted as money, not like the old days when they saw it as something that wouldn't succeed.
 
The US government wants to be in control of whatever service their citizens are making use of, which can allow them to send or receive payment. Any service that can be proven to a money transmitter is either getting a corporation license or the three-letter US agency will come right after you.
 
Now I think they have succeeded in getting most of the centralised exchanges under their control and watch, so what's left next is self-custodial services. Don't be surprised when they go after Metamask and other web wallets that US citizens are allowed to make use of, as the SEC has already declared Metamask to be an unlicensed broker-dealer, so the next step is to get it shut down whenever they want.
 
The SEC, FBI, and other government agencies that are responsible for the regulation and attack on crypto firms are all doing this because they feel crypto currency and other services that offer privacy are obstructing them from having full monetarily control over their citizens finances. Like I said before, these people just make the rules to suit them and come after anything that poses a threat to them.

People will not have that problems if they choose open source non custodial wallets too use.

No only because government ask Google or any company to delist, block it from their application store, using a close source wallet is not recommended.

[List] Open-source Lightning wallets

It's because they have questioning the US about the recent take-down of Samourai and for them, it is not clear,



https://twitter.com/acinq_co/status/1783878732865740940

So before they could be the next target, they just decided to shut it down for their US customers unless it's very clear where they LN wallet will fall, on what category from the United States.

Bitcoin is the most decentralized crypto currency and it also is the best and most popular one . In addition to all these,  Bitcoin has the highest value of all the crypto currencies, all these make it the top Crypto currency. In fact these are part of the reasons why the governments are skeptical about fully legalizing Bitcoin in some countries with the main issues being that Bitcoin is decentralized therefore even if the government legalizes it they still won't have fully control over it.

And just like you mentioned Oshosondy, sometimes people use Bitcoin for illegal transactions making it difficult for the government to track them. Those custodial wallets were used to replace the ones that were removed so that user will probably just use the custodial wallets since they are unable to install Satoshi wallets.
In all I guess making use of a VPN would still allow you access the wallet that were removed.

In short they want their citizen to use centralized exchange, they might allow non custodial wallet usage, but only for closed source wallet that created by it's exchange e.g. Coinbase, Bitget.

This year is really bad for privacy users (in United States) since they keep attack privacy tools and tightening their laws.

About United States taken down Phoenix? This is a link that you can read about it https://news.bitcoin.com/acinq-to-withdraw-phoenix-wallet-from-us-markets-amid-regulatory-concerns/

It is not noncustodial.

Most likely their reason, they see the growing activists that are fighting for the rights of people that have been using bitcoin and cryptocurrency and they don't know how to control it besides the limiting on the usage of bitcoin, trying to make the use of it as claustrophobic as it can be for the people so they can get discouraged from using it and eventually making bitcoin less and less valuable as the people that want to use it aren't or can't use it because of the limits imposed by the government, it's probably a high time that the people fight back because bitcoin's worth fighting for you know, if that were to happen in my country, I don't think that not speaking up is the right choice.

Phoenix wallet was non-custodian the last time I checked. Is that an error or they've made changes to their mode of operation?

The United States are shutting down all privacy platforms that are available. Controlling the flow of money is their biggest strength, these channels gives people an alternative system to use, moving amounts they cannot trace or regulate.

Their goal is to crush Bitcoin and bring it to their feet. The attack is both external and internal. And trust me they won't stop until their aim of regulating Bitcoin is achieved. By the way if these apps aren't available on the play store and app store for US citizens isn't it going to be available on the official websites of software?

I guess I am behind on the Chainanalysis news. Kindly reply this with the link so I can get properly informed on it. Thanks.

Some weeks back or probably some months back, wallet of Satoshi was removed from Google Playstore and App store for United States citizens not to be able to access it. No reason stated.

It is now Phoenix wallet which is one of the best custodial lightning wallets for bitcoin. No reason also stated for removing the lightning wallet from the Google Playstore and App store for United States citizens not to be able to access it.

I guess these lightning wallets are targeted one after the other but we do not know the reason. Is it because Chainanalysis were unable to trace the lightning transactions or the wallet developers are not cooperating with the United States to make lightning transactions on their channels less private?