Nocturne Labs, a privacy protocol designed specifically for the Ethereum ecosystem, has announced the closure of its operations. The company, having received support from notable cryptocurrency figures including Vitalik Buterin, co-founder of Ethereum, made public its decision to wind down on June 5.

Despite the lack of an official explanation for the shutdown of the privacy protocol, Nocturne Labs initially strived to implement enhanced privacy features like private accounts and transactions within the Ethereum network. In a significant funding milestone, the company successfully raised $6 million in a seed funding round in October 2023, with substantial contributions from Bain Capital Crypto, Polychain Capital, and Vitalik Buterin.

Even as Nocturne Labs ceases operations, users will still have the opportunity to conduct withdrawals through the Nocturne front end until the conclusion of June. The company plans to transition to a self-serve withdrawal system via a dedicated GitHub repository, offering detailed instructions for users on how to reclaim their funds using a CLI tool.

The shutdown of Nocturne Labs coincides with a decline in its Total Value Locked (TVL), currently standing at over $129,000 from the peak of over $455,000 reported during the announcement of the Nocturne V1 closure on January 22, as per information from DefiLlama.

Rumors circulating attribute the closure of Nocturne Labs to growing regulatory pressures on privacy-focused initiatives. A statement from the protocol on January 22 hinted at future plans, underscoring the ongoing importance of privacy within evolving applications. The broader context of escalating scrutiny on privacy-centric cryptocurrency ventures, exemplified by the U.S. government's issues with Tornado Cash in August 2022 and legal proceedings against Alexey Pertsev, the developer of Tornado Cash, for alleged money laundering despite the protocol's noncustodial nature, sheds light on the challenges faced by such projects.