The U.S Government announced recentlythat it would be placing a ban on the Ethereum coin mixing service Tornado Cash.
The reason for the ban:
Tornado Cash allows users to make private Ethereum transactions by pooling together large volumes of transactions and mixing them to prevent tracking. The site is popular among privacy-minded crypto enthusiasts but it’s also used by hackers looking to launder their ill-gotten gains. Bad actors like the North Korea backed Lazarus Group are specifically cited as having a particular affinity for Tornado Cash. They were behind the ~$8 million Nomad Bridge hacklast week.
The Treasury Department claims that combating hackers is the impetus behind the ban in the United States, however, security experts argue that this will not deter criminals from laundering their crypto. This will undoubtedly open up Pandora’s box for a slate of new Tornade Cash style contracts. The federal government will then need to deal with these new Tornado clones in an endless game of whack a mole.
Legitimate Applications:
A friend in my Alpha Chat asked if there were any legitimate use cases for Tornado Cash as a service. The best answer I could muster was to avoid the ire of oppressive government entities…however, that would probably make the use of a service like Tornado Cash illegal under the said regime. Privacy enthusiasts argue that the ban on Tornado Cash is just another step towards more restrictive crypto regulation. This move brings us ever closer to the surveillance state that we have been trying to escape with decentralized Web 3 technology.
Jeff Coleman, co-founder of a startup called Counterfactual posited another legitimate use case for Tornado Cash on Twitter:
“Wanting to donate to Ukraine is a great example of a valid need for financial privacy: even if the government where you live is in full support, you might not want Russian government to have full details of your actions.”
In an ironic twist, the founder of Ethereum, Vitalik Buterin who was born in Russia wrote back:
“I’ll out myself as someone who has used TC to donate to this exact cause.”
While we continue to process the fallout from this ban, chaos agents have taken matters into their own hands as a way to make a statement.
“Max chaos — someone is sending TC’d ETH to big doxxed wallets like Shaq, Beeple, Randi Zuckerberg, Ben Horowitz, Brian Armstrong, etc” -0xJim
If Ethereum coming out of Tornado Cash is illegal now, it could be an issue that so much of it is ending up in celebrity wallets. Perhaps they all got with the times and started paying for their schedule 1 substances with crypto.
Also, Jimmy Fallon always gave me North Korea-backed hacker vibes…they can have him back.
Privacy may have taken an L today but the internet remains undefeated.
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Disclaimer: Nothing in this article constitutes professional investment advice. Please do your own thorough research before making any investment decisions.