Financial Freedom against Money Laundering
Tornado cash, what is it? Tornado cash is a cryptocurrency tumbler, a decentralized application built on the Ethereum blockchain that facilitates privacy for its users. It facilitates privacy by pooling the crypto of all its users, mixing them, and send the user different crypto making it almost impossible to trace the origin of the transaction. Blockchains are very transparent, and you can see which wallets make transactions with each other. To use Tornado Cash, you deposit funds into the protocol and claim your deposit minus a fee in your wallet.
On the seventh of august 2022, the Office of Foreign Asset Control (OFAC) placed Tornado Cash on the sanctions list. The protocol would have helped criminals to launder their money. Crypto analyst company Elliptic concluded that 1,5 billion dollars were laundered with Tornado Cash. It is now illegal for US citizens and companies to use the tool.
There is a lot of skepticism about placing Tornado Cash on the sanction list, Tornado Cash is not a company but a DAO (Decentralized Autonomous Organization) – simplified, a protocol that runs without any human interaction. An interesting recent example is that someone made a transaction to Black Rock, the world’s largest investment management firm based in the US, using Tornado Cash. This would imply that BlackRock is unwittingly involved in an illegal transaction.
Does Tornado Cash have any legal value? Yes, if someone lives in an oppressive regime, they might want to increase their privacy. An example demonstrating the legitimate utility of Crypto Mixers occurred when Vitalik Buterin, one of the co-founders of Ethereum, donated funds to Ukraine in support of its conflict against Russia. Consider the significance of privacy for a Russian individual seeking to contribute financially to Ukraine’s cause.
Alexey Pertsev, one of the developers of Tornado Cash, got arrested right after the US placed Tornado Cash on the sanctions list. He is held responsible for laundering over 1,2 billion dollars and might face a 64-month sentence. The controversy in this case is that crypto mixers are not illegal by law, which is why some find the accusation unfair.
In conclusion it all comes back to the question: “How do we provide a high level of privacy while making money laundering impossible?”
