The sanction by the Office of Foreign Assets Control (OFAC) of the U.S. Department of Treasury on Tornado Cash is quickly creating room for thought-provoking questions around decentralization.
Members of the Tornado DAO are presently debating on how the community should protest the recent penalties the US Treasury put on Tornado Cash. This comes after a developer for Tornado Cash was detained in Amsterdam. The decentralized autonomous organization known as Tornado DAO is in charge of managing the protocol’s money. Data from DeepDAO indicates that it has over 9,000 members.
Tornado cash DAO, source: DeepDAO
Tornado Cash was then reportedly used to launder more than $96 million in cash from hostile cyber actors obtained from the Harmony Bridge Heist on June 24, 2022, and at least $7.8 million from the Nomad Heist on August 2, 2022. The decision made is in accordance with Executive Order (E.O.) 13694, as modified, and it comes after OFAC designated virtual currency exchange Blender.io on May 6, 2022. (Blender).
The Proposal And Its Problematic Piece
In a proposal headed “Saving Tornado Cash: Formally Challenging the US Treasury’s Penalties,” one of these active members suggested that the DAO generate money for Tornado Cash and employ legal counsel to challenge the sanctions. The plan also instructed the DAO to file a legal challenge and, if necessary, take it all the way to the US Supreme Court.
However, some respondents to the proposal have raised questions about this approach. MakerDAO delegate, Chris Blec, argued that since there is no legal entity called “Tornado Cash,” raising funds under such a banner for legal defense could “open up a whole new can of worms that is misleading and dangerous.” Blec stated that Tornado Cash is software code and that the best approach would be to fight for an individual’s right to privacy.
Continued Tornado Cash Intimidation
As soon as the Treasury’s OFAC added Tornado Cash to the SDN list, it sent a clear message to the whole globe that anybody connected to the dApp will face the same sanctions, which include a 30-year jail sentence. As a result of this pressure, Circle’s USDC stablecoin, blacklisted addresses and freezing 75,000 USDC.
At the same time, Roman Semenov, the author of Tornado Cash, was banned from Microsoft’s GitHub platform.
Surprisingly, “decentralized” exchanges like dYdX started to restrict customers’ wallets because they had communicated with Tornado Cash, proving that even they were compliant with the directive. It can be difficult to understand, but decentralization occurs on a continuum. Since the creators of fully decentralized apps would not have access to administrative keys or multi signatures, these apps lack such authority.
Sanctions are popular because they offer what appears to be a proportional response to challenges in which the interests at stake are less than vital. However, numerous thinkers are concerned that sanctions violate certain just principles and are inconsistent.
To sum up, McDonell, now executive director of the Association of Certified Anti-Money Laundering Specialists, said.
“Regulatory officials have made two things clear: they are supportive of the benefits that blockchain technology can confer on end-users, but they are not ready to trust the sector’s ability to manage its financial-crime risks.”
Do you think the Tornado cash probe beatings will continue, or will its fighting morale improve? Let us know in the comments section.
