The famous cryptocurrency mixer Tornado Cash was recently sanctioned by the U.S. Department of Treasury, prohibiting Americans from using a business that the agency claims “launders the profits of cybercrimes.”
Source : Bloomberg
What is Tornado Cash?
Blockchain transactions aren’t private (they are fully public & visible, merely pseudonymous). To solve this “problem” of transparent pseudonymity, Tornado Cash was born.
Tornado Cash is a decentralized & non-custodial privacy solution, built on Ethereum.
How does it work?
Once you send an ETH or ERC-20 deposit to Tornado Cash, you can withdraw your crypto through a new address. Once the asset is withdrawn by the new address, there’s no way to link the withdrawal to the deposit and this, in turn, ensures asset privacy.
Pros & Cons of Tornado Cash
For investors concerned with privacy, Tornado Cash offers a simple set of tools and hence acts a primary use case. However, if you use a mixer on your wallet, everyone will know that by simply looking at Etherscan.
Who ‘owns’ Tornado Cash?
Roman Semenov & Roman Storm created Tornado Cash. In May 2020, the Tornado Cash team relinquished control of the protocol’s multisig wallet through a contract update. Since then, the founders don’t have any control of Tornado Cash.
The Office of Foreign Assets Control (OFAC), a watchdog under Treasury’s purview, has added Tornado Cash and its associated crypto wallet addresses, to its “Specially Designated Nationals list.”, after the Treasury Department sanctioned Tornado Cash for allegedly helping launder over $7 billion of virtual currency. Americans are banned from using the service. Any person interacting with these wallet addresses could now face criminal penalties.
Implications:
Github (Microsoft owned) is an Internet hosting service for software development and version control using Git. One of Tornado Cash’s creator’s (Roman Semenov) GitHub account, was suspended post the investigation.
This brings us to the question – can a similar thing happen to Bitcoin, as its code resides on GitHub?
There are 352 Bitcoin core contributors according to bitcoin.org
There has been active discussion in the Bitcoin community regarding moving from Github to self-hosted/decentralized git alternative as well:
It is unclear as to how privacy concerns will be addressed in the future in the world of cryptocurrencies, however, there will be a watchful eye on the crypto mixers going forward from the regulatory authorities.
