On Monday, August 8, 2022, the US Treasury Department added Ethereum coin mixer Tornado Cash and a host of addresses associated with the service to its Specially Designated Nationals list, a designation generally reserved for terrorist groups and enemy groups states.
Basically, all Americans are barred from using Tornado Cash, a technology that mixes bitcoin transactions to hide their public footprints. Currently, the Tornado Cash website has been down recently
Treasury defended the move by citing multiple instances in which the service was used to launder money by criminal actors, including North Korea’s Lazarus Group and those who stole $7.8 million in last week’s Nomad Bridge attack.
Crypto Leaders Speak Out
Many crypto leaders have condemned the ban as unjust, unlawful, and an existential danger to user privacy, the holiest tenet of an anti-government, libertarian-shaped sector.
Most people agreed that the action may have made things worse between privacy advocates in crypto and the federal government, which could have long-term effects on the industry.
Tornado Cash’s position as a smart contract is important to its legal and ethical questions. Tornado Cash is an automated program that doesn’t need anyone to keep it running or keep an eye on it.
Two Different Types of Users
One of Tornado Cash’s founders, Ameen Soleimani, has said many times that the service was never meant for people who wanted to launder money but rather for regular crypto users who wanted to keep their financial information safe.
Many Tornado Cash supporters believe that the service’s manipulation by malicious users doesn’t reflect on the instrument itself. And therefore, one may reason, “Coin mixers don’t launder money, money launderers launder money.” According to University of Kentucky law professor Brian Fyre, Tornado Cash is a business, not First Amendment-protected speech as some have claimed, even if no one answers the phone.
Even though Tornado Cash’s developers don’t authorize every transaction, Fyre feels the law holds them liable if the illegal activity makes up a significant percentage of the site’s traffic.
Tornado Cash’s defenders worry Monday’s decision is only the tip of the iceberg. The U.S. government might restrict almost any service or product because it might be used for evil activities.
As the effects of the Tornado Cash ban start to spread to the rest of the crypto community, many people are now being forced to choose between following the law and sticking to their ideological beliefs.
Take into account that the Treasury Department banned many Ethereum addresses connected to Tornado Cash, in addition to outlawing the business itself. These addresses are now considered similar to those of a North Korean terrorist cell in the eyes of the federal government, making transactions with them illegal.
All Ethereum transactions are approved by a global network of mining machines, which process blocks of pending transactions in exchange for financial rewards. Would one of these miners have committed a felony comparable to helping an Iranian-sponsored militia if they had approved the transaction at a Treasury-sanctioned address?
The issue of how the US government would respond to and possibly prosecute the ban’s ramifications remains unanswered. But it seems that the Ethereum network will not assist users in complying with the government’s demands. Some worry that the crypto industry’s hard-line stance sets it up for a long and unprecedented fight with American authorities.
Dedicated to Privacy
According to Matthew Green of Johns Hopkins, as cryptocurrency users and thought leaders try to re-establish their dedication to privacy and decentralization in the wake of Tornado Cash’s banning, new businesses offering a comparable level of financial secrecy are expected to emerge.
In such a case, the crypto business is likely to react by putting up more open opposition to the restrictions and doubling down on illegal technology as the American government puts greater pressure on the sector to combat financial anonymity.
Uncertainty surrounds the possibility of such an event. However, if this week indicates how the crypto community will react to more government restrictions that violate the privacy of crypto transactions, this fight will continue for a while.