FBI Issues Warning on Unregistered Cryptocurrency Services Amid Arrests and Legal Tensions

FBI Issues Warning on Unregistered Cryptocurrency Services Amid Arrests and Legal Tensions

The recent warning issued by the Federal Bureau of Investigation (FBI) advising Americans against using unregistered cryptocurrency money-transmitting services may be targeting smart-contract-driven privacy tools, suggests a cryptocurrency lawyer.

In a public service announcement dated April 25, the FBI urged Americans to exclusively utilize registered Cryptocurrency Money Services Businesses that adhere to existing Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.

The FBI stated in its announcement that it had recently undertaken law enforcement operations against cryptocurrency services operating without the appropriate licenses as mandated by federal law. It cautioned that individuals using unlicensed services could face financial disruptions during law enforcement actions, especially if their funds are commingled with illegally obtained money.

Michael Bacina, the Digital Asset Partner at Piper Alderman lawyers, indicated to Cointelegraph that while the FBI’s announcement seems to caution users against employing crypto mixing services, such as Samourai or Tornado Cash, the warning is overly broad and overlooks the intricacies of decentralized systems.

“While this appears to be an effort to dissuade consumers from utilizing smart-contract-driven privacy tools like Samourai or Tornado Cash, it’s a generalized warning that overlooks many nuances in the operation of decentralized systems,” Bacina remarked. “The sooner we have tailored regulation and clear guidance for cryptocurrency, replacing regulation by enforcement, the better it will be for consumers.”

On April 25, the CEO and CTO of Bitcoin wallet and crypto mixing service Samourai Wallet were arrested on charges of money laundering. Keonne Rodriguez and William Hill face accusations of money laundering and operating an unlicensed money-transmitting business, with potential sentences of up to 25 years in prison.

Numerous commentators, including Bankless co-founder Ryan Sean Adams, have highlighted the vague definition of what constitutes a Money Services Business (MSB) and raised questions about its implications for cryptocurrency service providers.

Describing the FBI’s announcement as “unsettling,” Adams drew attention to the uncertainty surrounding which services might technically fall under the MSB designation. “Oh, and is your code or wallet an MSB? Maybe, maybe not—but we’re currently arresting privacy developers and labeling them as MSBs,” he noted in an April 25 post.

These developments unfold against a backdrop of escalating legal tensions between crypto firms and regulators in the United States. On April 25, Ethereum development firm Consensys filed a lawsuit against the SEC, alleging that the regulator had orchestrated a campaign to “seize control over the future of cryptocurrency” through enforcement actions aimed at classifying Ether as a security.