The Samourai Wallet Case and the Future of Self-Custody

Across much of the world, regulators have focused on applying to cryptoassets the same anti–money laundering and counter-terrorism laws. In some cases, those efforts threaten the legal status of software tools that enable self-custody of cryptoassets, allowing individuals to transact and custody their digital assets without the involvement of intermediaries.

In fact, recent criminal charges against developers who build privacy-focused Bitcoin wallets have brought a controversial legal theory into the spotlight. These self-custody wallet developers may be treated as money transmitters and prosecuted as if they were acting as financial institutions.

Money Transmission and Custody Models

In most jurisdictions, financial-crime compliance frameworks distinguish between banking services—which accept and transmit funds on behalf of third parties—and developers, who create tools that anyone can use to manage their own assets.

Under these rules and laws, money transmitters are people or entities that control a customer’s assets and transfer them to another party. To operate, they must register with the relevant authorities, implement KYC (Know-Your-Customer) programs, monitor transactions, and report suspicious activity.

Over the past decade, regulators have issued guidance to clarify how these distinctions apply to cryptoassets. In general, custodial services (centralized exchanges, hosted wallets, and payment processors) are treated as money transmitters because they control private keys and execute transfers of funds. By contrast, self-custody tools (software where users hold their own keys and transact directly without intermediaries) have historically been treated as operating outside this framework, since there are no intermediaries accepting or transmitting funds.

This line between custodial and self-custodial has been the basis on which regulators distinguish financial intermediaries from open-source software developers.

Traditional Payment Apps and Self-Custody

To better understand this distinction, it helps to compare the two models. Services that operate as intermediaries hold customers’ funds in pooled or segregated accounts, update internal ledgers when one user pays another, and move funds between bank accounts. Because these platforms accept funds from one user and transfer them to others, they fit the classic definition of money transmitters.

In contrast, self-custody Bitcoin wallets function more like a personal safe. Because users control their own private keys, the wallet software creates and signs transactions locally, and funds move directly from one blockchain address to another—without any intermediary ever accessing or custodying Bitcoin at any point.

In this model, the transmitter of value is the user who controls the private keys, not the software developer. The wallet is therefore a tool to construct and broadcast transactions to the network, not a financial institution managing the customer’s funds.

Extending Money Transmission Rules to Self-Custody Tools

Regulators have argued that facilitating peer-to-peer transactions can be enough to trigger money-transmitter obligations, even if the tool never decides when a transaction is executed. That would broaden the definition of money transmission to include those who maintain software that others use to manage their funds.

Critics argue that this interpretation imposes compliance requirements (KYC, monitoring, and reporting) on developers of non-custodial open-source tools that would be logistically impossible to meet, because there is no way to know who the users are or what transactions they are making. In a self-custody context, the true money transmitter is the party controlling the private keys, not the developer who wrote the code.

The Legal Treatment of Samourai Wallet

Samourai Wallet is an example of a self-custody Bitcoin wallet that has become central to the debate about financial regulations applied to open-source software tools. From a technical standpoint, Samourai Wallet was designed so users could fully control their private keys, choose how and when to transact, and not have to rely on third parties to store or transmit their funds.

When using Samourai Wallet, value circulates directly on the Bitcoin network between addresses controlled by users. The wallet software provides the interface to build transactions between users, but it never takes possession of bitcoin.

In addition, Samourai Wallet integrates privacy tools such as Whirlpool and Ricochet. Whirlpool is a CoinJoin-based protocol that allows multiple users to combine their bitcoins into a single transaction and receive different outputs back, making it difficult to link inputs and outputs for surveillance or analysis. Whirlpool is structured so each participant can custody their own bitcoins throughout the process; therefore, there is no pool of funds controlled by any intermediary.

Ricochet, in turn, allows users to add intermediate “hops” in the payment process by inserting intermediary transactions, making simple tracking heuristics far less effective. Both features were implemented in a way that preserves self-custody. As a result, Samourai Wallet is not responsible for managing or holding users’ balances, nor is it able to block or approve transactions.

To charge fees for the service provided, Samourai Wallet includes its own addresses in users’ transactions. This method allows the Samourai Wallet developers to receive compensation without custodying user funds. The fee is embedded in the transaction structure, but control of the funds remains with the user until the transaction is broadcast to the network and confirmed on the blockchain. The Samurai Wallet developers play no role in executing or approving transactions.

Privacy Tools, Illicit Finance, and Human Rights

As in other domains, the law does not accuse the creators of other tools for misuse by third parties. For example, developers of cryptographic software tools, VPN protocols, email clients, or social networks are not charged as if they had participated in crimes enabled by the misuse of the technologies they created.

From this perspective, the collapse of the distinction between building self-custody tools and operating a custodial cryptoasset service may introduce legal risk for anyone who builds security or privacy tools. Any precedent that developers are responsible for the harmful use of their code would have consequences not only for cryptoasset wallets, but also for cryptography, cybersecurity, and open-source software more broadly.

The cost to activists and vulnerable populations—who lose access to privacy-preserving technology—may exceed the benefits of fighting money laundering or terrorism if self-custody tools like Samourai Wallet are banned.

The impact is also felt in the loss of accessible financial tools for those who rely on Bitcoin’s open, voluntary, and censorship-resistant infrastructure. Restricting access to these tools in one country can indirectly exclude groups in other parts of the world.

Implications for Nodes, Miners, and Hardware Wallets

Another concern with this way of viewing tools such as Samurai Wallet is applying the same logic to other participants in the Bitcoin ecosystem—namely, hardware wallet providers who produce devices to store private keys offline; node operators who validate, relay transactions, and enforce consensus; miners who build transaction blocks; and even companies that provide shared custody such as Unchained or Casa.

In particular, node operators are often individuals who verify the network’s rules. By placing open-source tools in the money-transmitter category, these people could be seen as “transmitting funds,” even though they are not running a business or acting on behalf of others.

If running a node required a license or legal compliance, many participants would be excluded due to high costs or complexity. This could reduce the number and diversity of nodes, concentrate power in a small set of intermediaries, and weaken Bitcoin’s peer-to-peer, censorship-resistant structure.

Conclusion

The debate is not only about an isolated case or a single country. It raises fundamental questions that many countries will have to resolve, including: • How should we distinguish between a financial intermediary and a software tool? • How do we balance anti–money laundering and counter-terrorism goals with human rights? • What rights should citizens have in digital monetary systems? • How can regulation remain technologically coherent?

The controversy around non-custodial wallets and privacy tools involves more than legal actions or a handful of jurisdictions. It goes to the core of how societies will treat self-custody, the boundary between software and financial intermediation, and the role privacy should play in an era of transparent and monitored payment systems.

Ultimately, whether regulators treat self-custody tools as neutral infrastructure or as financial institutions in disguise will affect not only the future of digital assets, but also the future of cryptography, open-source software development, and digital civil liberties more broadly.

William Hill and Keonne Rodriguez are the developers behind Samourai Wallet, an open-source, privacy-focused Bitcoin wallet that offers a transaction-mixing service. In 2024, they were arrested and later pleaded guilty to conspiracy to operate an unlicensed money-transmission business connected to criminal activity. William was arrested in Portugal before being extradited to the United States. In November 2025, a U.S. federal court sentenced Rodriguez to five years in prison and Hill to four, plus three years of supervised release and a $250,000 fine for each.

The Bitcoin community stands in solidarity with William and Keonne and created a fund to help cover basic living expenses. You can find more details here.

A petition has also been created seeking a pardon for William and Keonne. Signing takes 30 seconds, and every signature helps show that the community supports them. You can find more details here.