Timeline and reactions of Tornado Cash being sanctioned by the United States
Tornado Cash is a decentralized cryptocurrency mixer utilising zero-knowledge-proof technology. Since all coins are gathered in the mixer, the relationship between the deposit and withdrawal addresses can be hidden to guarantee privacy of users.
On August 8, the U.S. Treasury announced sanctions against Tornado Cash, prohibiting all U.S. individuals and entities from providing services related to the Tornado Cash protocol, as well as from interacting with Ethereum wallet addresses sanctioned under the protocol. Therefore, TVL of Tornado Cash agreement decreased by about 12% in recent two days, while its token TORN decreased by about 46%. This round of sanctions is the first time that the US government has imposed sanctions on the DeFi protocol, which has caused a wide discussion among crypto users about the security and privacy of on-chain assets and the “decentralized” spirit of the Web3 world. Link
1.On August 8, the U.S. Treasury prohibited citizens from using Tornado Cash.
2.On August 8, Circle froze USDC in Tornado Cash wallets approved by the U.S. Treasury
3.On August 9, the Github account of Tornado Cash’s founder has been suspended
4.Until August 9, Tornado Cash (TORN) fell to $21.99, down 29.12% in 24 hours
5.On August 9, Gitcoin has suspended funding to Tornado Cash
6.On August 9, blockchain research company Elliptic has flagged all relevant addresses in Tornado Cash’s chain
7.On August 9, anonymous users are sending ETH to big whales through Tornado Cash
8.On August 10, Curve attackers transferred about 340 ETH to Tornado Cash, FixedFloat, and Binance
9.Until August 10, Tornado Cash has transferred more than $40 million in value out of ETH since the OFAC sanctions
10.Publish the list of Tornado Cash resources that were banned, including Tornado Cash, organization and personal GitHub accounts of TC contributors, all $USDC on Tornado Cash contracts, infura_io’s RPC, AlchemyPlatform’s RPC, and tornadocash’s RPC,etc.
11.Until August 10, Tornado Cash (TORN) fell to $18.5
Several KOLs or WEB3 participants have commented on this event, and this article selects a few to present.
1.Hayden Adams, the founder of Uniswap, pointed out that privacy is critical for a functional and safe society. Link
On 9th Agust, Hayden Adams says that arguments that privacy is only for illegal activity are absurd. And sanctioning an immutable smart contract, as opposed to individuals feels like a big freedom of speech issue and bad precedent. Attacking companies for complying with their local laws and regulations is usually not nearly as helpful as advocating for sensible laws.
2.Ryan Sean Adams, founder of Bankless, supports strong digital rights Link
On 10th Agust, Ryan Sean Adams indicateed that this event wont’s stop with Tornado. Aztec is an entire L2 dedicated to privacy. Zcash has been operational for years. More are coming. Will they make crypto privacy tools illegal or remain free? Every western nation will be forced to contend with this question. They must choose.
3.Erik Voorhees, Founder of ShapeShift, says that TC is and open source software tool which cannot be sanctioned Link
On 8th Agust, Erik Voorhees posted a tweet saying that TC was not a person, nor a business entity. It’s an open source software tool. It cannot be sanctioned, it does not respond to subpoena or legal request.
4.Jeremy Allaire, the CEO of Circle, commented that Circle would restricted the movement of USDC funds in those sanctioned addresses. Link
On 9th Agust, Circle, together with coinbase, restricted the movement of USDC funds in these sanctioned addresses, as a US regulated FI subject to Bank Secrecy Act (BSA) requirements,
5.On 9th Agust, Do Kwon, the founder of Terra, demonstrated that decentralized networks need decentralized money, obvious today more than ever Link
Summary and Discussion
There are two main opinions about the event.
First, it’s supportive for similar reasons as U.S. Treasury. Many crypto currency transactions are illegal, and criminals can use coin mixers to escape tracking and punishment. And Tornado Cash has aided hackers in the laundering of almost $7 billion in stolen funds.
The other one is opposition. Many project founders have publicly expressed their disapproval with this event. The main reason is that legitimate transactions still require privacy. Furthermore, some experts are concerned that if Tornado Cash can be sanctioned today, other privacy tools would also be sanctioned tomorrow. Since privacy is a real need, we must address the issue of where is privacy tools’ future, and clearly sanctions are not the best solution.
There is no definitive answer about the future of privacy tools, but the Tornado Cash event has clearly prompted more individuals to explore how to satisfy people’s needs for privacy tools while complying.