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Update on Tornado Cash’s Current Situation

By Cje95 | Chronic Illness and Crypto | 18 Aug 2022


Quick Background

Since U.S. regulators dropped the hammer on the mixer protocol Tornado Cash blacklisting it the response from the crypto community has been loud and clear calling foul. With the blacklisting U.S. businesses and individuals were banned from using it or having association with it. This resulted in the source code on GitHub and Discord for the protocol being shut down and the protocol's token value crashing. Even with the arrest of a developer in Amsterdam by Dutch officials on behalf of the American government, there has been one clear shining positive development. We have been able to see that even with the blacklisting there is a clear and shining issue facing governments across the world… the blockchain can resist censorship as even with everything being done to stop the protocol the underlying contracts continue to function.

 

New Developments

When the Treasury Department announced the blacklisting it was only going to be a matter of time and a question of who was going to launch legal action to try and undo the listing. Even though there is not a concrete answer to this question the non-profit think tank Coin Center has already publicly said they are looking at litigation to address the listing something that they call a gross overreach by the Treasury Department. In their announcement, they also indicated that they will be engaging with the Department's internal Investigator General to share their views and also to hear the explanation that the Department gave for such a move. 

 

Not to be outdone by the U.S. Dutch officials have stated that the developer that has been arrested for connection to Tornado Cash has released a statement that is certain to raise eyebrows. When the arrest first occurred it was shown in the light as being done on behalf of the U.S. however that might not be the most accurate or correct situation. The Dutch Fiscal Information and Investigation Service (FIOD) has stated that the developer could face charges and be punished if the developer writes a code for the sole purpose of engaging in criminal activity. Now on the surface, this would be extremely hard to prove and give the developer an ability to point to legal transactions as evidence for their intentions. This does mark a pretty extreme escalation in terms of a government's reaction to crypto as this is an incredibly serious crime both in the U.S. and in Denmark. Opening this box could lead to a cascade of issues and spiral into affecting the industry in a much broader sense than just anonymity and affect the privacy of individuals across the board.  

 

When the announcement hit naturally crypto leaders were quick to call foul however it has spread to those outside the crypto industry due to how this is being executed. We have even seen some action taken on behalf of some anonymous individuals who have sent various famous and influential people small amounts of Ethereum or dust. There are two different reasons this could be occurring and I see it likely as someone doing both. Using someone who has been hit with this as an example Jimmy Fallon has been sent ETH from Tornado Cash what this should theoretically do is force the government to freeze and investigate the wallet and launch an investigation into Fallon for interactions with a blacklisted account. Currently, the government does not seem to be doing anything about this. This leads to the second reason for the dusting to occur and that is to embarrass the government and show that they are all bark and no bite. Testing the government's reaction does have a downside in that it does give people with criminal intentions an idea of what the government would do if the protocol continued to be used. While this dusting is funny to see happen it does have some real-world implications and could cause the government to further overreact.

 

Final Thoughts

With everything that we have seen and heard one thing has been made extremely clear. The government is not done with Tornado Cash yet and this investigation and what will come out of it is going to last for a very very long time. Looking at Ripple Labs these cases against crypto take an enormous amount of time and resources so any idea or hope that this would be something that could quickly be resolved is almost guaranteed to not occur. 

 

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Cje95
Cje95

Graduated from Texas A&M in May of 2020 had dabbled in crypto since 2017 but dove in at the end of 2019. December of 2020 packed up and moved to D.C.! Huge sports fan, space nerd, and international newsreader! Follow me on Twitter @Cje95_


Chronic Illness and Crypto
Chronic Illness and Crypto

Cryptocurrency and Blockchain are going to be a huge part of the future and no matter who tries it isn't going to be stopped! Here I try to give my best insight and thoughts into the latest crypto news, features, developments. Further, I look to discover any link to news from the United States ranging from social-political issues to stock market and economic data.

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