Wallet of Satoshi Winds Down Custodial Service in EU. Here's The Laws That Affect It

Users of the lightning wallet application Wallet of Satoshi are reporting to be unable to access the application's custodial wallet, and are instead being prompted to use the application's non-custodial wallet.

"No longer available in you region," the error message reads, "you can keep using Wallet of Satoshi in self custody mode." According to social media posts, the error message has been reported by users from Germany, France, Italy, Spain, Poland, and the Netherlands.

Although Wallet of Satoshi has not put out an official statement regarding the change, it is likely that the winding down of its custodial service in the EU is in part affected by the Markets in Crypto Assets (MiCA) regulation, as well as the EU's Directive on Administrative Cooperation in taxation (DAC8).

MiCA's Time Is Almost Up

The EU's MiCA has widely been celebrated by large industry players for bringing clarity to cryptocurrency regulation within the EU. Under its framework, anyone holding custody of user funds must apply for a so-called MiCA license with national regulators.

A MiCA license functions similar to a banking license, and requires service providers regulated under MiCA to adhere to the EU's strict anti-money laundering (AML) and counter-terrorist financing (CTF) frameworks, just as any other financial institution.

Officially, MiCA went into effect on the 30th of December 2024, but the regulation allows for so-called grandfathering for service providers that existed prior to MiCA's enactment; Meaning that existing wallets, such as Wallet of Satoshi, fell under a regulatory grace period during the transitional regime.

For some EU countries, that grace period is now up with the turn of the new year. This includes Germany, Ireland, Greece, Slovakia, Lithuania, and Austria. For other EU countries a longer grace period technically applies, including Estonia, Spain, France, Luxembourg, and Malta.

By July 2026, all EU countries require a MiCA license from custodial service providers.

Anti-Privacy and Competition, Pro-Corporation

MiCA is an obvious nightmare for user privacy, but it is also a less obvious complete stifling of competition within the EU due to the cost the regime it imposes on custodial service providers. This includes application fees ranging between €5,000-25,000, minimum capital requirements of at least €125,000, and annual supervisory fees up to €100,000, in addition to lawyer, consulting, and compliance costs to implement AML/CTF frameworks.

In addition to MiCA, the EU’s 8th amendment to the Directive on Administrative Cooperation in taxation (DAC8) went into effect on January 1st 2026.

DAC8 stems from the Organization for Economic Co-operation and Development's (OECD) Crypto-Asset Reporting Framework (CARF), which requires all custodial service providers to identify their users and automatically report transactions to local tax authorities.

Given that users who reported issues with Wallet of Satoshi appear to also stem from countries with longer MiCA grace periods, such as France and Spain, it is likely that DAC8 coming into effect resulted in the decision to withdraw its custodial service from EU markets.

DAC8 places yet another burden on cryptocurrency services as a whole, favoring large corporations with existing legal and compliance frameworks over smaller projects attempting to set foot in the industry.

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