The United States Department of the Treasury added Ethereum coin mixer Tornado Cash and a large number of addresses linked with the business to its list of Specially Designated Nationals on Monday. This is a designation that is generally reserved for terrorist groups and hostile governments.
By taking this action, the Treasury Department has effectively prohibited any citizen of the United States from using Tornado Cash, a tool that enables users to conceal the public trails of their cryptocurrency transactions by combining a large number of individual cryptocurrency transactions into a single transaction. Since three days ago, the Tornado Cash website has been inaccessible to users.
The Treasury defended the move by citing numerous instances in which the service has been used to launder money by malicious actors. In these cases, there is the hacking group Lazarus Group, which is supported by the government of North Korea, and the people who stole $200 million from Nomad Bridge last week.
Is the ban unfair and threating the user’s privacy?
In the days that followed the announcement, some industry leaders criticized the ban not only as being unfair, but also as being illegal and posing an existential threat to the privacy of users. This may be the most important rule in an industry that has been shaped by libertarian and anti-government ideas from the start.
A crackdown on Tornado Cash was conducted by the Treasury Department with the intention of putting an end to unlawful activity. However, a significant number of everyday people who invest in cryptocurrencies with the best of intentions are currently in danger.
“Every U.S. person is going to have to be very careful about transacting with Tornado Cash,” said Ari Redbord, head of legal and government affairs at research firm TRM Labs, to CNBC. “Remember, sanctions are strict liability. Intent does not matter.”
The fact that the service has now been exploited by some users with ill intentions does not reflect negatively on the core instrument itself, according to many proponents of Tornado Cash.
Expert: “This is the first time I’ve ever seen a piece of software get shut down.”
Some people believe that the Tornado Cash ban is unique in comparison to every other cryptocurrency regulation that has come before it because it targets the underlying technology rather than the people who actually used it (the Treasury Department did not blacklist any individuals; rather, it banned websites and wallet addresses).
“This is the first time I’ve ever seen a piece of software get shut down,” Matthew Green, a computer science professor at Johns Hopkins University, told Decrypt. “And that’s kind of unique.”
Within the immature cryptocurrency industry, there are individuals who see the value of legitimately protecting their anonymity and choose to do it through the use of Tornado Cash. The receiver of a transfer made using a cryptocurrency wallet gets access to the purchaser’s public cryptocurrency wallet. This lets the recipient see the buyer’s account information and see what they’ve bought in the past.
When you use a cryptocurrency mixing service like Tornado Cash, such information is masked by the fact that the funds are anonymized and the identity of the buyer is concealed.
