Bitcoin Drain in the USA

6 mins

28 days ago

Francis Pouliot
Francis Pouliot


Bitcoin Drain in the USA

It's easy to criticize Bitcoin companies for pulling out of the United States of America, from the comfort of your armchair with zero skin in the game.

I don't presume to know why Acinq, Wallet of Satoshi, Wasabi Wallet (and many others) decided to block US persons from using their service, but here is my perspective as a non-US Bitcoin entrepreneur.

If creating transaction templates non-custodially on the behalf of users and take a fee for the service can be considered money transmission or a money service business activity in the United States, as it is alleged in the Samourai Wallet indictment, it is absolutely not a stretch to imagine that processing "just-in-time" transactions for users as an LSP, as well as performing loop-outs which basically constitutes an exchange BTC for Lightning, could be or will be considered money transmission.

Even more alarmingly, in “THE GOVERNMENT’S OPPOSITION TO DEFENDANT ROMAN STORM’S PRETRIAL MOTIONS” in the UNITED STATES VS. ROMAN STORM case (Tornado Cash), the US government's argument attempts to refute the notion that non-custody of funds (“control” over funds) disqualifies a service from being engaged in the transmission of funds, and that people that operate, develop and pay for software which helps facilitate Bitcoin transactions even without having control over the funds still qualifies them as being engaged in money transmission – see picture below.

“The defendant argues that the ordinary meaning of the words “accept” and “transmit” requires the business to have control of the funds. As with the word “transferring,” however, the definitions of these words does not require the narrow interpretation urged by the defendant”.

The prosecution attempts to interpret the intent of Congress in passing these laws:

“If Congress had intended that control of the funds was a requirement, it could have said as much in the plain text of the statute” and “Congress surely did not intend the statute to be so easily evaded—which is likely why Congress did not include the word “control” in the statute in the first place”

Under the same (faulty) logic there exists a very real slippery slope towards also considering mining pools or miners themselves, non-custodial Bitcoin wallets, Lightning Network or even Bitcoin nodes… to be money transmission services. Under such a broad interpretation of what constitutes money transmission when it comes the US law, pretty much every software involved in making, relaying, or mining Bitcoin transactions would qualify as a money transmitter. 

I personally think these interpretations are far-fetched, legally shaky, and it is uncertain whether they will hold up in court. However, the facts remain: Roman Storm was arrested and released on bail, while Samourai developer Hill is in jail.

If Bitcoin is money or a money substitute, which it no doubt is, then custodial wallets and custody service providers will almost certainly be considered money transmitters in the United States, insofar as they allow their users to make deposits and process withdrawals on their behalf. 

Some people in the Bitcoin space are making the case that no Bitcoin service provider can be interpreted to be a money transmitter because Bitcoin is “not money” but rather is “speech” or “software”.

⁠This argument is, pardon my French, fucking retarded. Of course, Bitcoin is money. Even if Bitcoin is not legally recognized as such by every government institution in many countries, anybody with half a brain recognizes that it acts as money in practice (particularly when it suits them). Governments refraining to consider Bitcoin as money for political reasons simply classify it as a virtual asset that act as a money equivalent/substitute and include companies dealing with Bitcoin within the same frameworks that cover money service businesses, or they create new frameworks for virtual asset providers entirely, usually similar, and often worse than those covering fiat money transmission. 

We are in 2024, we are way past the stage of trying to redefine what is Bitcoin and what is money in a clumsy attempt to bamboozle regulators.  

One's reaction to this might be: we need to push back, stand and fight. That is a very noble stand to take. I support anyone taking it. For US companies, it totally makes sense to take that stand, since no matter what they are already under American jurisdiction and unless they plan on leaving, they're "on the hook". So, they have no choice but to take a stand and fight.

But as a foreign company, why take the risk? Sure, by pulling out of the USA you lose access to the world's biggest market, but as not doing so could entail the end of your business and you spending a couple of decades in prison, so, it may definitely be worth it.

A non-US Bitcoin service provider might ponder… Am I breaking US law and will be spending a decade in a federal prison surrounded by murderers and rapists? I guess I'll find out on my next family vacation to Disney World in Orlando!

From a non-US person’s perspective, it appears that you could be arrested without prior notification and need to defend your case in court, if you inadvertently found yourself in a state of “non-compliance” because your lawyers foolishly assumed that “transmission” in the context of financial regulation referred to the exchange of money rather than the diffusion of heat through a frying pan – see picture above.

I think Americans are used to seeing people arrested for bullshit technicalities and thrown in jail for long periods of time. But in the rest of the world, it is quite uncommon. For a non-US Bitcoin entrepreneur, the US is a scary and dangerous place. American authorities seem resourceful, competent, and motivated to destroy your life just to prove a point. This line of thinking is not paranoia, nor is it cowardice.

If you are not a US-based company, you have better chances to have a meaningful impact on the lives of billions of people and push forth the cause of Bitcoin globally by not soliciting US customers. And even if you are not soliciting US clients nor operating in the US, who knows what obscure international treaty imposed by the US you may be accidentally violating. Better to err on the side of caution, cut ties with US customers publicly and demonstrate that you are taking steps to prevent US customers from accessing your service. 


Personally, if I had any doubt whether the U.S. government was considering me to be operating an unlicensed money service business in the United States, I would not set foot in the United States for fear of being detained as soon as I cross customs. 

Making a Bitcoin app available on the app store in a certain country can easily be construed as soliciting clients from that country and operating in that country. While it may seem silly, removing your app from the US app stores sends a clear signal that there is no solicitation of US customers.

US bitcoiners should also expect other measures to restrict their access to foreign-based Bitcoin services which will include banning US-based IP addresses and US-based phone numbers. I wouldn't come as a surprise if no-KYC businesses eventually decided to KYC their clients, even when not legally mandated in their jurisdiction, specifically to avoid accidentally serving US customers.

There is an argument to be made that the problems US citizens are facing because of their government's overreach will inevitably become everyone's problem. Indeed, many governments around the world emulate the United States, and most international organizations are heavily influenced by US diplomats and policies.

American Bitcoin Companies and citizens should stand up to their government. They have nothing to lose and everything to gain. Bitcoiners around the world should support them in any way they can.

Abandoning the US market is not only the best strategic move for a non-US company facing such risks and uncertainties, but also a good wake up call for American consumers which have become complacent in their belief that their country is still the land of freedom. 

In an earlier tweet, I said that "Americans are too toxic". To be clear, I love Americans and America. I love the culture of freedom and capitalism, and the American spirit. But the reality is that by dealing with US customers, you expose yourself to the radioactive toxicity of the three-letter agencies.


This is the sovereign individual thesis playing out: in the digital age, entrepreneurs will go where they are best treated.

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