Banning a service because it "might be used for illegal purposes" is insufficient. This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more. I would rather money-launderers get away with things and for freedom to prosper than to have an all-encompassing surveillance state.
"Might be used for illegal purposes" is a significant understatement. The chief selling point of Tornado Cash is money laundering, which is in and of itself a crime in both the US and Netherlands.
Normally, there'd be an aspect of plausible deniability: torrent index operators can, for example, rightfully claim that they're facilitating legal filesharing, or that they're entirely agnostic to the content being shared (if all they're doing is sharing URLs). What's key in this case is that law enforcement claims that Pertsev was aware of the crimes his service was being used for. Whether or not that's actually true is up to a court to decide.
"The chief selling point of Tornado Cash is money laundering, which is in and of itself a crime in both the US and Netherlands."
You have a fundamental misunderstanding of US law with regard to money laundering. Obfuscating the source of funds, by itself, is not money laundering. Money laundering requires a "predicate offense" - the money that is being laundered must be proven to have had an illicit source. Further, the entity accused of doing the "laundering" also must know that the source of funds is illicit before doing it. Intent to promote the carrying on of "specified unlawful activity" must also be proven in order for a money laundering conviction to occur. You can read the entire statute here [1].
Therefore, the "chief selling point" cannot be money laundering, at least under US law, because the contracts were deployed with no prior knowledge of how or by whom they would be used. One cannot form intent without prior knowledge. The chief selling point was anonymity, not money laundering, which has a highly specific legal meaning.
> chief selling point of Tornado Cash is money laundering, which is in and of itself a crime in both the US and Netherland
Also, law enforcement publicly announced Tornado was used to launder billions by North Korea [1]. Months ago [2]. Everyone continued as if nothing happened. This wasn’t based on hypotheticals.
> Normally, there'd be an aspect of plausible deniability
If it was publicly known that you had exactly 1 ton of legally acquired gold in your house, would you feel perfectly safe sleeping at night? Is there not 1 sicko out there that would be willing to torture your family to find the combination to your vault?
Plausible deniability exists here. It's called wanting privacy, and there's perfectly valid and non-criminal reasons to want privacy, despite repeated false claims.
Here is the problem. Many cryptos are not actually anonymous. If somebody has somebody's wallet address, they can look into tracing information about them like their net worth and their purchasing history. Even if you were smart enough to use a different wallet address for each transaction, you inevitably have to spend money to live or send money to others and then you can be traced. As tools grow more sophisticated and more data about wallet address ownership gets out there, the more at risk people will be. And once your identity gets out there, there's no shaking the ability to track it short of some form of mixing or obfuscation. In an of itself, mixing or trading to obfuscate your identity shouldn't be considered a crime or unreasonable in the slightest.
The chief purpose of a mixer is financial privacy. It’s just that on a public blockchain privacy from snoops and privacy from law enforcement can’t be differentiated.
GP isn’t wrong, though. Even if the primary value of Tornado Cash is dubious, I’m still uncomfortable with the contemporary attitude of “block first, ask questions later (maybe)”.
Everytime a major bank is caught doing something like that, UBS and Deutsche Bank come to mind, there is huge outcry about the lack of consequences. If a crypto exchange get's caught doing it, and there are consequences, there is huge outcry (among certain people) because there are consequences. Added severity, in the case of tornado cash, was helping North Korea. So not just money laundering but also circumventing sanctions that are taken very seriously by every political power that actually matters. Heck, even the Chinese at least try make it look like they adhere to the North Korea sanctions.
Note that "money-laundering" is only a thing you have committed if you are dealing in funds that are the proceeds of another crime. If you are not committing another crime, you are more than welcome to conceal the source and destination of your financial transactions.
The chief selling point of Tornado Cash was addressing the significant privacy problems inherent in a currency based on a public ledger. The idea that we should destroy privacy tools because criminals use them is ridiculous.
The chief selling point of Tornado Cash is money laundering
Firmly disagree. The chief selling point of Tornado Cash is a mixer. Please see my reply to essentially this same misconception a month ago, which includes concrete, legal use cases:
It can be proven they're not agnostic by doing the bad data test (malware, supposed (not real) child porn). If it gets removed, that's a sign of moderation. And all big, previously known torrent or DHT hosters remove such. Combine it with the fact an %x is illegal content (e.g. copyright infringement) which does not get removed and you have a case.
It's a service specifically designed to facilitate money laundering. It's a bit like running a business that produces paperwork to make stolen cars indistinguishable from legal ones - there's no reason such a service should be allowed to exist.
That's like saying knives are designed to facilitate murder.
TC is made for privacy, which either is or should be a basic right.
Without tools such as TC if I send you money, show you some POAPs[1] I own, or otherwise interact in any way with my crypto, it is fairly simple to deduce or make educated guesses of how much crypto I own, who I send it to or from, and more. This has serious implications not only for privacy, but for safety reasons too.
TC makes it so you can transfer from your cold wallet to your hot wallet, without trivially revealing what your cold wallet is (and thus your funds).
Furthermore TC also allows you to keep a receipt of these anonymous transfers, so you can in the future prove the origin of your funds or reveal such transactions.
So are casinos, banks, money exchanges, and hot dog stands. There are tons of reasons for wanting privacy that have nothing to do with money laundering. Avoiding kidnapping & ransom because someone can’t see the size of your crypto wallet for example.
Why do you use a pseudonym on here instead of your real name? Oh right because you care about privacy. Same reason tornado cash exists. Playing the ML card is like saying Tim Berners-Lee invented the internet to facilitate digital crime.
Then produce distinct legislation that bans the specific practices used, otherwise it's just giving preference to currently entrenched forms of money laundering.
It's not illegal whatsoever to mix up my dollar bills with a group of other people and get the same amount out that I put in. Such a statement is ridiculous.
450m is a whopping 6% of all deposits on Tornado Cash[1]. The total percentage of illicit activity on the protocol is reported to be in the 10-30% range[2].
What percentage of activity in an E2EE chat application like Matrix is illicit? If a significant but minority percentage of its use is facilitating criminal discussion, should those open protocols also be sanctioned?
How much of it is used for legitimate reasons versus illicit ones? If the overwhelming majority of the transactions are illicit, it makes sense to ban it.
I agree with you, but I'd like to point out that the same logic could be applied to e.g. game console emulators.
...and as much as I hate to say it, I do think the logic might be correct in both situations. (I say this as a heavy user of console emulators—albeit also as someone who does go through the trouble to legally dump his own games.)
How much of $100 bill use is for legitimate reasons versus illicit ones? If the overwhelming majority of the transactions are illicit, it makes sense to ban the $100 bill.
if central powers stop being lazy then nothing was illicit. No violence can be inflicted from trading digital currencies. It's lazy policing to try and control resources rather than stop the actual violence.
If someone owns a resource, no matter who they are, why shouldn't they be able to utilize it? If that resource was acquired with violent means such as human trafficking - then maybe our policing efforts should be to catch the perps trafficking humans, then they'll have everything they need to confiscate any and all resources those perps have.
This roundabout, lazy method of hurting innocent people in hopes that you only mostly hurt guilty people doesn't sit well with me and I don't think it's good for society to allow this kind of behavior.
Criminals are most certainly going to get away with it regardless of how many restrictions and surveillance you apply to the little people, as they have the means (capital) to do so. I don't want to stretch it too far, but the current rules seem nearly purposefully pointed towards the least effort category. There's quite a lot of coverage on this matter, some (and a lot in the cryptocurrency scene) like to cite works from Ronald F Pol who has done a lot of heavy handed criticism on AML et cetera (as far as claiming less than one percent of real-world regulations effectiveness), these claims can be disputed, but it's apparent even to mainstream publications most unlawful flows are uninhibited and the approach is ineffective, expensive and dangerous.
wait what ? literally the entire point of financial regulations is to avoid it to "possibly be used for illegal purposes". Starting with the very basic KYC regulation, or the fact that in many countries cash transaction above a limit are forbidden.
I'm all about privacy and anonymity of transactions personally, but tornado investors going all "surprised pikachu" right now after a more-than-previsible ban is a bit laughable...
> This is a problem with law enforcement in general: they are lazy and seek to have automated solutions to so much of what used to be called police work. This applies to warrant-less wiretaps, pulling information on people from 3rd party data brokers to side-step warrant and FOIA requirements, and more.
The flaw with this line of reasoning is that behaviors have changed. In the past, when the police did "police work", people had no choice but to meet in person to discuss their criminal enterprises. You could follow them, and listen in. Many illicit schemes also left a trail of paper that needed to be stored in physical space.
It's not that the police have gotten lazy, it's that if you expect criminals to hang out in a shady dockside speakeasy like they did when Al Capone ran the town, you're simply not going to find anything.
This is a real tricky problem to which I'm not sure there are good solutions. There's a mounting conflict of interest upholding the law on the one hand, and the interests of law-abiding citizens on the other.
The USA PATRIOT Act requires every financial institution and money service business have an AML department. There are thousands of people in the US that are paid to look at your bank account and decide if you've been naughty or not and narc to the feds if you have. This is happening everyday. We are already living the surveillance state.
Not one to defend Silk Road, but pause and think about it for a second: it enabled you to buy something deemed illegal by the authorities (drugs) in a safe manner and the products bought were higher quality than what you could buy on the street. Why was it a problem to begin with and why where significant resources used to shut it down? (Again, not defending it, and the founder was probably a scumbag, I am just asking the question)
People were breaking stupid laws from the 70s established after mass hysteria around drugs by one of the scummies US president ever. More than that, the tax man was not getting its cut.
You have to remember that access to the US financial system is a privilege not a right. To be granted that privilege, a financial institution has a number of obligations. Thesee include various KYC/AML obligations.
So this isn't Tornado Cash "might be used for illegal purposes" so much as it's clear evidence they're failing to meet their legal obligations.
There's a larger point here too: as much as proponents tour crypto's extragovernmental status, it would take very little effort by governments to completely cripple any crypto assset in practical terms.
So proposing a hypothetical. If the only issue here is obligation to the U.S. financial system what if the only on-off ramps to e-coins were cash only?
So as an individual, I convert my cash to e-coins through some e-coin dedicated ATM-like machine. And I can redeem my e-coins for cash at another e-coin-ATM somewhere else (maybe anywhere in the world).
Would coin pools like Tornado Cash then be acceptable? It would not be tied in any way to the credit or banking systems, it takes cash only, and then just a basic utility internet connection. Maintenance for the machines and paying the internet utility would just be a fraction of a percentage fee on each transaction.
Now all e-coins would simply exist as a privacy themed alternative ecosystem to cash.
Since we are not joining the U.S. financial system, these e-coins should not be expected to have any obligations to that system correct?
It's not a black and white issue; things aren't getting banned because they might be used for illegal purposes, that is even explicitly stated in the article.
If its used for a high percentage of criminal purposes (for example 90%) banning is legitimate.
Also, who are these "investors"? They're speculators. When you speculate, there's risk involved. This is one of them. This case is an unnecessary burden on our legal systems, I hope it gets thrown out of court ASAP.
You seem to think that freedom means a world in which you are allowed to hide your assets from the government. You have never been allowed to do that. You're going to have to change the law, and because you live in more or less a democracy, you're going to have to convince people that its good to change the law.
History did not start in 1913. Income is not an asset, they have been two different things for longer than the United States has existed as a country. Most governments in recorded history have managed to exist without taxing income.
It would in fact be better live in a country with financial privacy where assets form the tax base instead of income. In terms of convincing the public, I think time will do the former and education the later.
For the time being the government has yet to decide wether crypto is money, a currency, an asset, or a security. Instead it has been going after people for all of them.
It probably depends. I live in Chicagoland. Cops here are a lot of things, but I can't honestly say they are underfunded. The pension alone is likely worth the risk ( source: couple cops in my extended family ) even if money is not staggering ( and it still not on the low end by any means ).
But to go back to the original query. It is just so much more easier to click couple of buttons than go somewhere and ask questions. It is cheaper too. The convenience trumps most of the other reasons. The same goes for privacy. The convenience killed it.
Tornado Cash has a great feature that you can use to prove the source of funds that were withdrawn from it as needed. This would allow exchanges to implement something where funds from Tornado could have to provide this proof before depositing. It could be fully compliant with both privacy and what exchanges/governments want. Coin Center does a great write up of it here, under "Compliance Tool"
Mixers never fail to astonish me. They are explicitly a product to facilitate money laundering. They are marketed as a way to wash illicit funds. And then the folks who run them get mad when law enforcement tries to shut them down?
They are explicitly a product for user privacy. Given that the depositor can prove the source of funds put into tornado cash via a zk-proof there is no reason that this should be shut down.
That's the facade. In my experience, Bitcoin is still the main ecoin demanded in phishing/ransomware incidents, even when more privacy-friendly ecoins exist. A tumbler's purpose is distorting Bitcoin's public blockchain (one of its core tenets), and that's very attractive to criminals.
> VPNs are "data mixers" - by combining all your traffic with others
If a VPN is used to help North Korea, and the developers won’t or can’t shut it down, yes, it will be sanctioned. More broadly, speech is generally protected under U.S. law in a way financial transactions are not.
>They are explicitly a product to facilitate money laundering
How is HN so consistently cryptophobic?
Imagine the reaction you’d get here suggesting say, E2EE is “explicitly a product for {crime}”. You’d be rightly mocked, but throw in crypto and it’s like 75% of the people here lose basic reasoning skills. I’d be less frustrated if it wasn’t so common.
No, it’s like saying E2EE encryption is designed to secure private communications between two parties, which is what it’s designed to do.
Mixers are designed to facilitate money laundering. You can claim it’s for legitimate privacy, etc but it doesn’t change the fact that it’s money laundering.
People aren't surprised that they're trying to shut them down, the concept gets more and more resilient with every.single.enforcement.action and so the enforcement actions have to follow the law, that's what we're talking about here, in court.
Has anyone done research on whether more financial crime happens in crypto or traditional finance? I'd be interested to see the result, adjusted for market cap or daily transaction volume or whatever makes the most sense.
This is definitely a pandora's box type issue. I believe it is different from the "code is speech" series of arguments around PGP because a deployed smart contract is not merely source code / compiled bytecode, but also a wallet containing funds. Of course, you still need the Ethereum "world computer" to make it run, and Tornado Cash is not very helpful without a significant amount of liquidity to sufficiently provide cover for people who want to obfuscate the source of their funds. These issues are likely to arise in court and I don't believe the conclusions will all be favorable to crypto supporters because I don't think the situation is as clear cut.
When a smart contract is deployed, literally all that happens is that the code is broadcast to the network. It is true that the contract itself has a wallet and runs operations, but it operates autonomously outside the control of the person who deployed the contract.
If a smart contract does something illegal, the person who deployed it has no more responsibility than if someone does something illegal with encryption software downloaded from Github. The only responsible part you could really argue for is the Ethereum node operators, since they're the ones actually carrying out the illegal computation. But is the government really going to outlaw the Ethereum network?
Here's a thing: when technology is designed in a way that makes it hard to work within the bounds of the legal system, it's usually the case that the legal system wins, not the technology. The view of the legal system is focused around people and their intentions, regardless of how much you try and confuse things with technology.
They will most likely view the smart contract and its wallet as one entity, despite that being technically not how it works technologically. Because as many people have tried and failed to figure out over the years, laws are interpreted by juries and judges, not computers. Technological roadblocks are things they don't have any problems jumping over, and deliberately trying to add roadblocks like that with the imagination they're untouchable also tends to piss them off even more.
> If a smart contract does something illegal, the person who deployed it has no more responsibility than if someone does something illegal with encryption software downloaded from Github.
If I rig up my car to explode when someone walks by whistling the right tune, am I without responsibility? I didn't blow up the car.. the car blew itself up.
Obviously I'm at fault. There is no debate here. Any automation you create is acting on your behalf - and you are liable for it. If I hire a hitman.. I am guilty of murder.
AI or software isn't some clever loophole here. If you deploy an autonomous money laundering system.. you are doing money laundering.
Can anyone defending Tornado Cash provide a concrete example of mixing crypto revenues in a way that is not clearly illegal? I've scrolled this whole thread, and there are a lot of people defending it, but none of them provided a full e2e example of
"I sell x to y, y can only use crypto, y will be persecuted if I don't obscure my transactions from z, so therefore this is a good thing"
Yes we can all do the hypothetical "dissident in AUTHORITARIAN_COUNTRY needs to buy x and will totally be persecuted otherwise" but I want an actual production example not a moral whataboutism.
> One plaintiff in the lawsuit is a crypto investor who used Tornado Cash to send funds to support the Ukrainian war effort, hoping to preserve his anonymity and avoid retaliation from the Russian government.
Although I agree that this is a morally good usage of TC, I think that given the intent of using TC is to avoid retaliation from the Russian government it would probably be considered illegal in the users jurisdiction.
A better example might be to pay for a legal service without revealing your entire wallet balance to that service.
Ok so a user who already has crypto and doesn't want to convert it first (fees) may be encouraged to mix it (privacy) and that is a legitimate usecase. That makes sense to me, though it seems like a very rare event that should not be the sole basis for the underlying platform.
Though I personally support breaking Russian law in this case - I also think this is almost certainly in the "clearly illegal" category for Russian law.
Oh this NYTimes article doesn't go into detail but Coinbase's blog entry about them spearheading the lawsuit does have specific use cases, and the associated court filing has even more use cases, that are not theoretical at all.
They all do it for privacy. Someone with a publicly labelled address doesn't want people watching them to know they're making a large purchase, so funds go in through tornado cash, and out to a new address nobody is looking at.
If you are not aware, Tornado Cash already comes with tools to solve investigative zeal, anyone audited can prove the prior source of funds with Tornado Cash, at which point the investigator can tell if they were clean or not, as opposed to just assuming because they aren't familiar with "a concrete example of mixing crypto revenues in a way that is not clearly illegal"
Do you know that crypto is normally completely traceable?
So if I for instance withdraw 100 million from an exchange, in a completely legal manner, and then visit a store or webshop to buy something with the same funds, then the store now knows that I have 100 million dollars?
> So if I for instance withdraw 100 million from an exchange, in a completely legal manner, and then visit a store or webshop to buy something with the same funds, then the store now knows that I have 100 million dollars?
The more common this example of legitimate use becomes, the less useful it is, defeating the purpose.
If it becomes common for crypto known to have come from Tornado to be there because the person is concealing ownership of a large amount of crypto, the store can infer the same thing the previously could see on-chain: this person probably has a large amount of crypto. And then all the same risks apply, albeit with a minor unknown as to the amount.
But since we're basically talking about a "rubber hose" attack here it doesn't really matter if they can directly see it on-chain, they're still going to assume it and likely do the same thing.
I get paid in crypto. My colleagues don't know how much I earn. If any of them discovered the address I'm paid into, they'd know my salary by looking up my address.
I used Tornado Cash (non-US citizen here) for hiding transactions from the public (not hiding from the government), and when I filed my taxes, I still accounted for everything that is stored there + transacted via Tornado Cash, just like I do for my bank account. Appendix contained instructions for how they could access the proof of my transactions and accounts to verify themselves.
I kind of agree that Treasury should not have exactly this power to ban Tornado protocol. However, I believe Treasury certainly has the power to ban all transactions with networks hosting money laundering protocols.
It would certainly be worse for crypto if it were illegal to buy sell ETH and friends because their networks host Tornado protocol. I see this attempt to moderate the network itself as “going easy” on crypto investors.
The crux of the issue comes down to moderation. In a sufficiently large and complex network, moderation becomes a necessity not an option. This won’t be the last case.
Regulators generally strike when sufficiently popular technology makes it sufficiently easy to perform sufficiently damaging illegal activity.
Moderation is generally not required under US law.
For example, Section 230 of the Communications Decency Act provide safe harbor provisions: 'No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider'.
It doesn't matter if I run a site with 10 users or 100 million users: the law's provisions and protections are the same.
You are right that regulators generally strike when there is a critical mass. However, my 2c is that this is not backed by statue, and US Treasury does not have the right to sanction software code. They can certainly sanction users who use TC for money laundering, but code itself?
That's like sanctioning PGP or end-to-end encryption...
Sorry to be clear, I’m not claiming moderation is legally required, I’m claiming it effectively becomes necessary for a network to avoid stepping on landmines.
For example, it’s impossible to run a social network website of 100 million users without users uploading illegal content. Moderation is a necessity to avoid being taken down by the feds for hosting illegal content.
I agree that treasury doesn’t have the right to sanction code. They do have the right to ban exchanges from exchanging ETH. However, nobody wants that, so they’d rather try and extend their powers to effectively become ETH moderators.
The reality is Treasury does not have the political capital to outlaw Ethereum. It's a $200 billion asset that one in ten Americans and many of the largest pensions, hedge funds, and Biden's largest donors are invested in.
Yes. That’s why they would rather try and moderate crypto networks rather than ban.
If they don’t succeed, I’d expect more heavy handed attempts by other branches of government.
I don’t think the government will ever give up, in large part because I think there is political capital and mandate to regulate crypto (just not ban it). If crypto crashes even further, a full ban might be possible some day.
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Normally, there'd be an aspect of plausible deniability: torrent index operators can, for example, rightfully claim that they're facilitating legal filesharing, or that they're entirely agnostic to the content being shared (if all they're doing is sharing URLs). What's key in this case is that law enforcement claims that Pertsev was aware of the crimes his service was being used for. Whether or not that's actually true is up to a court to decide.
You have a fundamental misunderstanding of US law with regard to money laundering. Obfuscating the source of funds, by itself, is not money laundering. Money laundering requires a "predicate offense" - the money that is being laundered must be proven to have had an illicit source. Further, the entity accused of doing the "laundering" also must know that the source of funds is illicit before doing it. Intent to promote the carrying on of "specified unlawful activity" must also be proven in order for a money laundering conviction to occur. You can read the entire statute here [1].
Therefore, the "chief selling point" cannot be money laundering, at least under US law, because the contracts were deployed with no prior knowledge of how or by whom they would be used. One cannot form intent without prior knowledge. The chief selling point was anonymity, not money laundering, which has a highly specific legal meaning.
[1] https://www.law.cornell.edu/uscode/text/18/1956
Also, law enforcement publicly announced Tornado was used to launder billions by North Korea [1]. Months ago [2]. Everyone continued as if nothing happened. This wasn’t based on hypotheticals.
[1] https://hub.elliptic.co/analysis/the-100-million-horizon-hac...
[2] https://www.cnbc.com/2022/06/30/north-korea-likely-behind-10....
If it was publicly known that you had exactly 1 ton of legally acquired gold in your house, would you feel perfectly safe sleeping at night? Is there not 1 sicko out there that would be willing to torture your family to find the combination to your vault?
Plausible deniability exists here. It's called wanting privacy, and there's perfectly valid and non-criminal reasons to want privacy, despite repeated false claims.
Here is the problem. Many cryptos are not actually anonymous. If somebody has somebody's wallet address, they can look into tracing information about them like their net worth and their purchasing history. Even if you were smart enough to use a different wallet address for each transaction, you inevitably have to spend money to live or send money to others and then you can be traced. As tools grow more sophisticated and more data about wallet address ownership gets out there, the more at risk people will be. And once your identity gets out there, there's no shaking the ability to track it short of some form of mixing or obfuscation. In an of itself, mixing or trading to obfuscate your identity shouldn't be considered a crime or unreasonable in the slightest.
The chief selling point of Tornado Cash was addressing the significant privacy problems inherent in a currency based on a public ledger. The idea that we should destroy privacy tools because criminals use them is ridiculous.
https://news.ycombinator.com/item?id=32443738
Privacy =/= laundering.
Tornado is/should be perfectly legal to use to pay IRL vendors without revealing the entire contents of your hot/cold wallets.
It’s also useful to move money between hot/cold wallets safely.
The same thing could be said about paper money.
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That's right: Government sanctioned open-source SOFTWARE. Are you sure you want this precedent set?
TC is made for privacy, which either is or should be a basic right.
Without tools such as TC if I send you money, show you some POAPs[1] I own, or otherwise interact in any way with my crypto, it is fairly simple to deduce or make educated guesses of how much crypto I own, who I send it to or from, and more. This has serious implications not only for privacy, but for safety reasons too.
TC makes it so you can transfer from your cold wallet to your hot wallet, without trivially revealing what your cold wallet is (and thus your funds).
Furthermore TC also allows you to keep a receipt of these anonymous transfers, so you can in the future prove the origin of your funds or reveal such transactions.
[1] https://poap.xyz/
That’s like saying TLS was designed to protect CP.
Privacy =/= laundering
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It's not illegal whatsoever to mix up my dollar bills with a group of other people and get the same amount out that I put in. Such a statement is ridiculous.
What percentage of activity in an E2EE chat application like Matrix is illicit? If a significant but minority percentage of its use is facilitating criminal discussion, should those open protocols also be sanctioned?
[1] https://dune.com/poma/tornado-cash_1
[2] https://www.eff.org/deeplinks/2022/08/code-speech-and-tornad...
Using volume of illegal activity cannot be the primary factor in categorizing a platform.
...and as much as I hate to say it, I do think the logic might be correct in both situations. (I say this as a heavy user of console emulators—albeit also as someone who does go through the trouble to legally dump his own games.)
The regulation should be the existing Know Your Customer requirements plus a 100% traceable log subject to inspection, auditing and subpoena.
If someone owns a resource, no matter who they are, why shouldn't they be able to utilize it? If that resource was acquired with violent means such as human trafficking - then maybe our policing efforts should be to catch the perps trafficking humans, then they'll have everything they need to confiscate any and all resources those perps have.
This roundabout, lazy method of hurting innocent people in hopes that you only mostly hurt guilty people doesn't sit well with me and I don't think it's good for society to allow this kind of behavior.
https://www.economist.com/finance-and-economics/2021/04/12/t...
https://en.wikipedia.org/wiki/Danske_Bank_money_laundering_s...
I'm all about privacy and anonymity of transactions personally, but tornado investors going all "surprised pikachu" right now after a more-than-previsible ban is a bit laughable...
The flaw with this line of reasoning is that behaviors have changed. In the past, when the police did "police work", people had no choice but to meet in person to discuss their criminal enterprises. You could follow them, and listen in. Many illicit schemes also left a trail of paper that needed to be stored in physical space.
It's not that the police have gotten lazy, it's that if you expect criminals to hang out in a shady dockside speakeasy like they did when Al Capone ran the town, you're simply not going to find anything.
This is a real tricky problem to which I'm not sure there are good solutions. There's a mounting conflict of interest upholding the law on the one hand, and the interests of law-abiding citizens on the other.
People were breaking stupid laws from the 70s established after mass hysteria around drugs by one of the scummies US president ever. More than that, the tax man was not getting its cut.
Now to put things in perspective let's compare to some things US agencies have done in the past: https://en.m.wikipedia.org/wiki/Allegations_of_CIA_drug_traf...
So this isn't Tornado Cash "might be used for illegal purposes" so much as it's clear evidence they're failing to meet their legal obligations.
There's a larger point here too: as much as proponents tour crypto's extragovernmental status, it would take very little effort by governments to completely cripple any crypto assset in practical terms.
So as an individual, I convert my cash to e-coins through some e-coin dedicated ATM-like machine. And I can redeem my e-coins for cash at another e-coin-ATM somewhere else (maybe anywhere in the world).
Would coin pools like Tornado Cash then be acceptable? It would not be tied in any way to the credit or banking systems, it takes cash only, and then just a basic utility internet connection. Maintenance for the machines and paying the internet utility would just be a fraction of a percentage fee on each transaction.
Now all e-coins would simply exist as a privacy themed alternative ecosystem to cash.
Since we are not joining the U.S. financial system, these e-coins should not be expected to have any obligations to that system correct?
Also, who are these "investors"? They're speculators. When you speculate, there's risk involved. This is one of them. This case is an unnecessary burden on our legal systems, I hope it gets thrown out of court ASAP.
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It would in fact be better live in a country with financial privacy where assets form the tax base instead of income. In terms of convincing the public, I think time will do the former and education the later.
What's your opinion of Tor?
But to go back to the original query. It is just so much more easier to click couple of buttons than go somewhere and ask questions. It is cheaper too. The convenience trumps most of the other reasons. The same goes for privacy. The convenience killed it.
?
https://www.coincenter.org/education/advanced-topics/how-doe...
That's the facade. In my experience, Bitcoin is still the main ecoin demanded in phishing/ransomware incidents, even when more privacy-friendly ecoins exist. A tumbler's purpose is distorting Bitcoin's public blockchain (one of its core tenets), and that's very attractive to criminals.
Honestly, why can't we just have the government know every single website we visit immediately? We all have nothing to hide
If a VPN is used to help North Korea, and the developers won’t or can’t shut it down, yes, it will be sanctioned. More broadly, speech is generally protected under U.S. law in a way financial transactions are not.
Or if your employer pays you, and decides to kick you out because he doesn’t agree with some transactions you made?
The same is true with all the loto and gambling crypto sites. They run without any oversight and are blatantly breaking the law.
How is HN so consistently cryptophobic?
Imagine the reaction you’d get here suggesting say, E2EE is “explicitly a product for {crime}”. You’d be rightly mocked, but throw in crypto and it’s like 75% of the people here lose basic reasoning skills. I’d be less frustrated if it wasn’t so common.
Mixers are designed to facilitate money laundering. You can claim it’s for legitimate privacy, etc but it doesn’t change the fact that it’s money laundering.
It should be shut down.
If a smart contract does something illegal, the person who deployed it has no more responsibility than if someone does something illegal with encryption software downloaded from Github. The only responsible part you could really argue for is the Ethereum node operators, since they're the ones actually carrying out the illegal computation. But is the government really going to outlaw the Ethereum network?
They will most likely view the smart contract and its wallet as one entity, despite that being technically not how it works technologically. Because as many people have tried and failed to figure out over the years, laws are interpreted by juries and judges, not computers. Technological roadblocks are things they don't have any problems jumping over, and deliberately trying to add roadblocks like that with the imagination they're untouchable also tends to piss them off even more.
If I rig up my car to explode when someone walks by whistling the right tune, am I without responsibility? I didn't blow up the car.. the car blew itself up.
Obviously I'm at fault. There is no debate here. Any automation you create is acting on your behalf - and you are liable for it. If I hire a hitman.. I am guilty of murder.
AI or software isn't some clever loophole here. If you deploy an autonomous money laundering system.. you are doing money laundering.
"I sell x to y, y can only use crypto, y will be persecuted if I don't obscure my transactions from z, so therefore this is a good thing"
Yes we can all do the hypothetical "dissident in AUTHORITARIAN_COUNTRY needs to buy x and will totally be persecuted otherwise" but I want an actual production example not a moral whataboutism.
> One plaintiff in the lawsuit is a crypto investor who used Tornado Cash to send funds to support the Ukrainian war effort, hoping to preserve his anonymity and avoid retaliation from the Russian government.
A better example might be to pay for a legal service without revealing your entire wallet balance to that service.
Also I should've read the full article first.
They all do it for privacy. Someone with a publicly labelled address doesn't want people watching them to know they're making a large purchase, so funds go in through tornado cash, and out to a new address nobody is looking at.
If you are not aware, Tornado Cash already comes with tools to solve investigative zeal, anyone audited can prove the prior source of funds with Tornado Cash, at which point the investigator can tell if they were clean or not, as opposed to just assuming because they aren't familiar with "a concrete example of mixing crypto revenues in a way that is not clearly illegal"
https://storage.courtlistener.com/recap/gov.uscourts.txwd.11...
So if I for instance withdraw 100 million from an exchange, in a completely legal manner, and then visit a store or webshop to buy something with the same funds, then the store now knows that I have 100 million dollars?
Mixing can be used for self protection.
The more common this example of legitimate use becomes, the less useful it is, defeating the purpose.
If it becomes common for crypto known to have come from Tornado to be there because the person is concealing ownership of a large amount of crypto, the store can infer the same thing the previously could see on-chain: this person probably has a large amount of crypto. And then all the same risks apply, albeit with a minor unknown as to the amount.
But since we're basically talking about a "rubber hose" attack here it doesn't really matter if they can directly see it on-chain, they're still going to assume it and likely do the same thing.
I see the need for privacy in this instance.
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And how exactly does your bank account publish your transactions to the public?
It is code.
It would certainly be worse for crypto if it were illegal to buy sell ETH and friends because their networks host Tornado protocol. I see this attempt to moderate the network itself as “going easy” on crypto investors.
The crux of the issue comes down to moderation. In a sufficiently large and complex network, moderation becomes a necessity not an option. This won’t be the last case.
Regulators generally strike when sufficiently popular technology makes it sufficiently easy to perform sufficiently damaging illegal activity.
For example, Section 230 of the Communications Decency Act provide safe harbor provisions: 'No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider'.
It doesn't matter if I run a site with 10 users or 100 million users: the law's provisions and protections are the same.
You are right that regulators generally strike when there is a critical mass. However, my 2c is that this is not backed by statue, and US Treasury does not have the right to sanction software code. They can certainly sanction users who use TC for money laundering, but code itself?
That's like sanctioning PGP or end-to-end encryption...
For example, it’s impossible to run a social network website of 100 million users without users uploading illegal content. Moderation is a necessity to avoid being taken down by the feds for hosting illegal content.
I agree that treasury doesn’t have the right to sanction code. They do have the right to ban exchanges from exchanging ETH. However, nobody wants that, so they’d rather try and extend their powers to effectively become ETH moderators.
If they don’t succeed, I’d expect more heavy handed attempts by other branches of government.
I don’t think the government will ever give up, in large part because I think there is political capital and mandate to regulate crypto (just not ban it). If crypto crashes even further, a full ban might be possible some day.