Tornado Cash and National Security
2022.12.05 12:56
Tornado Cash and National Security
Budrigannews.com – When the same user is introduced to a block explorer, they look up their address, and the same transaction is displayed on the blockchain for all to see.
This is a second powerful moment.
Bitcoin (BTC), Ether (ETH), and other cryptocurrencies are the subject of competing visions.They could be bank accounts, payments, currency, or the future of gold.
But no matter what kind of cryptocurrency you have, none of them will work unless they achieve the same level of privacy as cash or, at the very least, credit cards.Even though credit card companies monitor our financial lives like no other, our transactions cannot be seen by the public.
There are various apparatuses to accomplish protection accessible in crypto, from security coins to blenders and conjoining exchanges on the Bitcoin blockchain.Just like cash, these tools are used by everyday people and occasionally by criminals.
Or, to be more specific, criminals use crypto and crypto privacy tools less frequently than cash.
Crypto is safer than fiat.
Chainalysis: Transactions involving illicit addresses represented just 0.15% of cryptocurrency transaction volume in 2021.
United Nations: estimated money laundered globally in one year is 2-5% of global GDP, or $800B – $2 trillion in USD.
Sources
— CZ Binance (@cz_binance) May 6, 2022
Tornado Cash, the best Ethereum privacy tool, received approval from the Office of Foreign Assets Control of the United States Treasury Department. Two lawsuits have been filed in response to OFAC’s efforts to counteract the sanction and the threat posed by sanctioning code as speech.
What has been lost in the FTX show throughout recent weeks is the deft moving that OFAC has participated in to advance its essential situation in the suit. “On the basis of new information,” OFAC “redesignated” Tornado Cash on November 8.
The likely source of the “new information” is two significant legal challenges that were brought forward a few weeks prior and poked holes in OFAC’s designation. Even though the DAO lacked the authority to alter the code because the admin key had been burned, OFAC appears to be pushing a novel theory in its second designation that the decentralized autonomous organization surrounding Tornado Cash was a group.
The designation’s proponents argue that it was a fair trade overall to accomplish national security objectives. Tornado Cash “obfuscated the movement of over $455 million stolen in March 2022” was the stated justification for the designation.
But was it truly true? To function, privacy tools need a large anonymity set.That is the main way that little exchanges by conventional clients can conceal in a huge group. And it only works if privacy tools are used correctly and mirror transfers into and out of shielded assets in a short amount of time are avoided.
Take into consideration that the specific transfer made by North Korean hackers represented 20% of the entire pool of Tornado Cash. North Korea wasn’t getting any meaningful privacy by using the Tornado Cash tool because of the sheer volume of ETH it was trying to move through it. It makes me think of Godzilla trying to cover himself up with a fig leaf, which is a funny image.
If the Treasury Department had allowed North Korean hackers to continue using the tool while it monitored their transactions using statistical tracing analysis, it would have accomplished more for national security. Instead, OFAC accomplished nothing more than national security theater.
In the meantime, the Ethereum blockchain has been seriously harmed.One model, as verified by Ethereum fellow benefactor Vitalik Buterin, is that Twister Money anonymized gifts to help Ukraine.The Treasury Department has the authority to sanction anything, from applications and computer code to specific assets, if the sanction imposed on Tornado Cash is upheld.
As though on signal, previous Depository official Juan Zarate contended in a new meeting that the Depository Division ought to utilize the Nationalist Demonstration more “imaginatively” to endorse whole classes of resources in crypto. From there, sanctioning gold coins or other common assets is a short process.
The sanctioning of things simply because criminals use them is not supported by society.On roads, criminals drive.They make use of hardware store tools. They make use of these things to help them commit crimes.
Any crypto protocol or asset can be sanctioned by OFAC if the vague sanction of “Tornado Cash” is allowed to stand.Additionally, this poses a threat to the viability of any meaningful vision for the future of cryptocurrency.
The George Mason Law School employs J. W. Verret as an associate professor.At Lawrence Law LLC, he also practices securities law and is a crypto forensic accountant. He is a former member of the SEC Investor Advisory Committee, a member of the Zcash Foundation’s board of directors, and a member of the Advisory Council of the Financial Accounting Standards Board. He is also in charge of the Crypto Freedom Lab, a think tank that works to change policy so that crypto developers and users can keep their privacy and freedom.
This article is for general informational purposes only and should not be interpreted as investment or legal advice. The author’s views, thoughts, and opinions are their own, and they do not necessarily reflect or represent those of Cointelegraph.
The first time a new crypto user sends a significant amount of money to their private wallet is one of their most memorable experiences.It’s an amazing, serious moment, but it’s also a little bit scary to experience the technology’s power and personal responsibility firsthand with real money.
