BlogThe implications of the Samourai Wallet case, self-custody, and money transmission

POSTED ON Apr 26, 2024

The implications of the Samourai Wallet case, self-custody, and money transmission

Yesterday, the Department of Justice arrested the founders of Samourai Wallet, a well-known non-custodial wallet solution, and charged them with conspiracy to commit money laundering and unlicensed money transmission. The case is notable for a number of reasons, with some interesting implications for wallet providers and those who use them. 

Samourai Wallet is not unique amongst non-custodial wallet providers by providing access to their platform, without holding licenses or following key regulations. This is a common position taken by other non-custodial wallet providers: Because they don’t have access to their customers’ private keys, they don’t establish basic anti-money laundering controls or identify their users through a KYC program. With this latest charge two important trends stick out:

  1. Money laundering activity can happen on non-custodial solutions — and that can hurt not only the wallet provider, but those who choose that solution. The charges against Samourai Wallet suggest that the obligation to prevent, detect, and report on criminal activity still applies to non-custodial solutions. 
  2. Money Transmitter Licenses (MTLs) may increasingly become a need-to-have — regardless of whether the solution is custodial or non-custodial, so long as a centralized cloud is involved to facilitate transactions. Because Samourai Wallet is being charged with unlicensed money transmission, there’s an indication that non-custodial solutions may need to obtain MTLs to continue their operations moving forward. 

In essence, it’s clear bad-faith actors can take advantage of non-custodial solutions, and the DOJ rightfully wants to tamper this behavior down. While this case was very specific, focused on Samourai Wallet, bad-faith actors, and its relationship with end users, it’s not a far leap to think about the implications more broadly for businesses using non-custodial solutions. In fact, the FBI just issued a PSA warning Americans to avoid using non-KYC solutions entirely for money transmitting. 

There are real reasons to evaluate providers more stringently, and consider the reputational risk involved in using a non-compliant embedded wallet solution should nefarious activity occur, as well as the risk of criminal exposure.  

We believe the only way to safely and legally offer wallet-as-a-service solutions is through licensed and compliant financial services, which is why we’ve built a regulation-first platform from the beginning. This is one reason we’ve consistently talked about the need for MTLs and why we believe regulated wallets are the future. In everything we do, we strive to be a truly trustworthy place to build web3 experiences, both for our customers and their end users.   

To build a regulated solution, we’ve proactively sought licenses at both the state and federal level to keep our products and customers in compliance with all relevant laws and regulations, and we’ve developed a best-in-class anti-money laundering program, protecting both Bastion and our customers from accidentally facilitating financial crime. In addition, our licenses help ensure that we only offer financial services with permission from the proper authorities. 

While the Samourai Wallet case is still in the early days, the lessons are relevant for anyone leveraging wallet solutions. We believe this case yet another development that reaffirms the importance of trust, a strong compliance posture, and providing infrastructure that builders can scale with to find long-term success. 

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