BigONE: The Impact Of Tornado’s Cash Recent Ban On The Future Of Cryptocurrency
On Monday, August 9th, the US government banned Tornado Cash, a popular privacy protocol on the Ethereum blockchain, citing money laundering of more than $7 billion since its inception. The US Treasury Department enforced this ban following OFAC ( Office of Foreign Assets Control). The platform was added to the Treasury Department’s Specially Designated Nationals and Blocked Persons List (SDN), which prohibits all transactions on Tornado Cash by people in the United States “unless authorized by a general or specific license issued by OFAC [Office of Foreign Assets Control],” according to the announcement.
The news has sparked outrage in the crypto community, who see it as an invasion of privacy and security that contradicts the ethos of blockchain technology. BigONE will examine the impact of the tornado’s cash ban on the future of cryptocurrency and whether the crypto community, particularly in the United States, will be open to more regulations in the future.
The Ban’s Impact
The Treasury’s decision to ban Tornado Cash could be a watershed moment for cryptocurrency in several ways. For starters, it demonstrates how far the US government is willing to go in its efforts to contain cryptocurrency as it moves closer to mainstream adoption. Defenders of Tornado Cash have pointed out that the decision is unprecedented because sanctions have been imposed on a piece of code rather than an entity. (Tornado Cash is not a legal entity but a software-controlled mechanism.) This step could mean that other decentralized bodies, such as smart contracts or DAOs (decentralized autonomous organizations), will be targeted soon.
While some have been outspokenly opposed, others see the ban as beneficial because it reduces cybercrime. According to Redbord of TRM Labs, “this action sends a message to crypto exchanges that they must ensure that they have compliance controls to prevent cyber criminals from using their platforms.” Furthermore, TRM Labs claims that the Treasury’s decision demonstrates the US government’s desire to push cryptocurrency toward more centralized systems and platforms that are easier to regulate. For example, the trading platform Coinbase requires that every crypto wallet be linked to a verifiable human identity.
USDC, a popular stablecoin issuer, has already complied with US government sanctions, causing widespread skepticism in the crypto community, and discussions about looking for decentralized stablecoins as an alternative have been making the rounds, particularly on Twitter.
Crypto enthusiasts have identified logical flaws and decided to exploit these flaws to fight back against the US government. To begin, an anonymous tornado cash user has been sending 0.1 Eth from the platform to the addresses of celebrities such as Shaq O’Neal in a stunt that essentially dares the Treasury to take action against an entire community. A much bigger battle may be on the way: some prominent crypto lawyers have begun floating the idea of filing a constitutional challenge to the decision.
Many people believe that Bitcoin and DeFi are censorship-resistant initiatives that should be left alone by government bodies. BigONE believes the arguments advanced by the US Treasury have some validity but believes that this decision puts more innocent people at risk than guilty. Many blockchain and crypto enthusiasts have been echoing the sentiment that privacy should not be a crime in the last few days, as the crypto community takes steps to reverse what they believe is a horrible decision for crypto enthusiasts living in the United States.
BigONE believes that if this continues, cryptocurrency will face more regulation, and enthusiasts should seriously consider this a possibility in the near future. As we approach global adoption, government bodies are expected to do everything possible to make cryptocurrencies as legitimate and in accordance with their regulations as possible.
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