The company contracted by the UK government to provide accommodation to asylum seekers in parts of England and Wales has dropped the policy, which critics slammed as dehumanizing.
Clearsprings Ready Homes, which runs accommodation services for newly arrived asylum seekers in Lynx House, Cardiff, said the wristbands had been used since May 2015 "to ensure they receive the services they are entitled to and to make sure those more vulnerable asylum seekers have access to their specific requirements."
In a press release, the company said it would drop the wristbands as of Monday and "will look for an alternative way of managing the fair provision of support."
First Minister Carwyn Jones, who leads the Welsh government, issued a statement before Clearsprings announced the change, saying the use of wristbands "is completely unacceptable and goes against everything we stand for as a nation."
Jo Stevens, Labour Member of Parliament for Cardiff Central, tweeted that the wristband policy flew "in the face of the overwhelming spirit of generosity" shown to asylum seekers by the people of Cardiff.
Nearly all asylum seekers in the UK are forbidden to work and forced to rely on state support, according to the country's Refugee Council.
Reports of the wristband policy emerged in the wake of revelations last week
that asylum seekers in the northern English town of Middlesbrough were housed in homes with red-painted doors, making some residents targets of abuse.
The British government has ordered an urgent audit of migrant housing in the region in the wake of the allegations.
Asked about the wristband policy, a spokesman for the UK's Home Office said in a statement that the government expected "the highest standards from its contractors at all times, including that they in no way ever endanger the safety of the asylum seekers in their care."
The statement continued: "If there is any evidence to suggest this is not the case, it will be treated with the utmost seriousness and dealt with accordingly."
Outrage on social media
Reports of the wristband policy sparked a strong reaction on social media.
"Red doors. Now red bracelets. What next? Yellow stars?" tweeted Giles Fraser, a London priest and newspaper columnist, in one of many comments referencing Nazi policies against Jews.
"Can we just write: '1. Don't act like a Nazi' on all (government) outsourcing contracts for housing/feeding asylum seekers?" tweeted British physician and broadcaster Ben Goldacre.
Others thought the Nazi comparisons overblown and pointed out that wristbands were regularly issued at music festivals and holiday resorts.
Wristbands have been issued to asylum seekers elsewhere in Europe, with migrants photographed wearing wristbands in countries including Germany, Austria and Greece.