Days after the U.S. government announced sanctions against crypto mixing platform Tornado Cash, Ethereum co-founder and alpha developer Vitalik Buterin opined on the matter, defending the platform's use case for legitimate contexts.
According to Buterin, Tornado Cash is an example of a platform that can be used for legitimate use cases, such as donating to causes that are politically contentious. Buterin, for one, admitted that he has used the platform to donate to Ukraine, which has been needing aid from the international community due to its present geopolitical conflict with Russia.
I'll out myself as someone who has used TC to donate to this exact cause.
— vitalik.eth (@VitalikButerin) August 9, 2022
Donations in solidarity with Ukraine's predicament have poured in from around the world, and the concern with regards to the privacy measures in place for doing so have abound since then. Crypto mixing platform Tornado Cash has been identified as one of the key services used for this purpose.
In recent weeks, the U.S. Department of Justice (DoJ) has been scrutinizing crypto mixer services such as Tornado Cash for possible links to criminal activity, leading to the U.S. Treasury instituting a ban for alleged laundering of "proceeds of cybercrimes," among other reasons.
The U.S. Treasury's Office of Foreign Assets Control (OFAC) has placed Tornado Cash on its sanctions list, meaning that any crypto addresses associated with the platform are now blocked from receiving crypto from U.S.-based wallet services or exchanges. The OFAC has also warned that Americans who transact with sanctioned entities could face civil or criminal penalties. Despite this, Buterin argued that crypto mixers like Tornado Cash can still be used for legitimate purpose.
This move by the U.S. government is seen by the crypto community as yet another attack on crypto privacy and consumer privacy rights in general, with some even going so far as to call it a declaration of war against crypto users who value their privacy rights.
"Wanting to donate to Ukraine is a great example of a valid need for financial privacy. On this note, curious if there are documented examples of TC having been used for this," shares Jeff Coleman, co-founder of Counterfactual.
As a smart contract mixer built on Ethereum, Tornado Cash was built with privacy and security as its first principles, with its code fully open sourced and community-controlled. No single entity can manipulate the platform and decide on its evolution. The Tornado Cash platform relies solely on a decentralized decision process to forward upgrades to its protocol, ensuring that the protocol lives on without interference from bad actors.
According to the U.S. Treasury alleges that the platform “has been used to launder more than $7 billion worth of virtual currency since its creation in 2019,” including some $455 million stolen by the infamous Lazarus Group, a group of threat actors involved in recent DeFi heists. Sources from the U.S. state intelligence service also point to the DPRK (Democratic People's Republic of Korea) as the state sponsoring this said group.
Tornado Cash has disclosed that its operations have also been affected since the ban, despite the sanctions only going for the U.S. jurisdiction. According to its co-founder, Roman Semenov, his GitHub account has been suspended, with resources for the platform also being suspended. This includes the platform's smart contract addresses linked to Circle (for stablecoins) and for the Infura RPC (for its Web3 gateways).
These sanctions have sent shockwaves across the industry, prompting discussion among policy and lobbying groups. Jerry Brito, executive director at Coin Center, says that the sanctions were implemented on a tool that was designed to be neutral in character. Coin Center is a non-profit that works for the benefit of pushing policy issues in the crypto sector.
Blockchain Association's Head of Policy, Jake Chervinsky, opined that despite their association's support for the U.S. Treasury's rationale for the sanctions, they reserve some concern over the fact that the ban "crosses a line that the US government has always respected [and] should continue to uphold as a matter of good policy." According to Chervinsky, the decision "to sanction a decentralized protocol, threatens that smart [and] balanced approach to crypto," referring to the Treasury's previous decisions which have largely been supportive of the crypto sector.
