Last month, the Treasury lifted sanctions on tornado cash. In response, many have rekindled the Trump administration’s call and stopped accusations against Keonne Rodriguez and William Ronergan Hill, as well as William Ronergan Hill, the developer of Samourai Wallet, who is currently being charged in the Southern District of New York.
What many seem to overlook is that the reversal of the Treasury sanctions on tornado cash revealed the Treasury’s stance on privacy services. And it doesn’t look good.
Tornado Cash removal from OFAC’s SDN list follows the lawsuit of Tornado Cash Users by Tornado Cash users, Van Loon v. It became known as the US Treasury Department.
The lawsuit was appealed in the Fifth Circuit. There, three judges ruled that sanctions for software like Tornado Cash were in fact illegal because OFAC’s SDN list is reserved for businesses, foreigners and property.
The Fifth Circuit directed Texas District Court to grant the plaintiff’s motion for partial summary judgment. This constitutes a binding court where software like tornado cash is not authorized by the US government under current sanctions laws.
Now the Treasury is fighting back in an attempt to avoid a ruling that strips its authority by claiming that the tornado cash has been removed from the OFAC list is not necessary. However, without judgment, agents can continue to sanction software that functions like tornado cash, and even reauthorize tornado cash itself.
The reversal of tornado cash sanctions has little to do with the prosecution of Samourai wallet developers, as they are not accused of avoiding sanctions.
However, the criminal prosecution of the tornado cash developer Rome’s storm is extremely important to their case. Because they were charged with unlicensed money senders and conspiracy to run the plot, as they could set precedents for the prosecution of Rodriguez and Hill.
It has long been understood that both Tornado Cash and Samourai wallets are purely non-mandatory software projects and were exempt from falling into the anti-money laundering framework that normally applies to banks. If Storm is found guilty in July, the government would have a much easier time filing the two Bitcoin developers.
While many have hoped that the new administration would put an end to cryptocurrency developers’ witch hunts, Trump’s Treasury Department appears to be equally at a disadvantage in developing the privacy code.
As Concincenter pointed out at the end of last year, crypto-based administrations are not necessarily comparable to a free regime of subcompetence and financial obligations. It seems we are now witnessing what this means. While lawsuits have been dropped against “crypto casinos” like Coinbase and Uniswap, privacy software developers such as Rodriguez and Hill continue to face decades of threats in prison.
The Treasury appears to reason these prosecutions with their hard-line stance on terrorist financing and cybercrime. As the agency wrote in its announcement of a reversal of tornado cash sanctions:
“The Treasury is committed to using authorities to expose and disrupt the ability of malicious cyber actors to benefit from criminal activity through the exploitation of the digital assets and the ecosystem of digital assets.”
With what appears to be the first, the Treasury has issued another warning user Privacy Services states that “US people should pay attention before engaging in transactions that present such risks.”
In emails addressing the reversal of sanctions on tornado cash, blockchain surveillance firm Chain Orisis appears to reflect the sentiment of the Ministry of Finance.
Messaging seems clear. Although it is not officially illegal to use or process mixing services, the Treasury appears to be trying to keep all options open in order to pursue fees for those involved in future privacy services.
As discussed in some Bitcoin magazine print articles, this stance is not a surprise, but rather an immediate consequence of integrating digital assets into the US regulatory framework. The more important Bitcoin is to the government, the more important it becomes to eradicate acts that are considered illegal or criminal.
Treasury Secretary Scott Bescent said of the reversal of Tornado Cash sanctions: “Securing the digital asset industry from abuse by North Korea and other illegal actors is essential to establishing US leadership and ensuring that Americans can benefit from financial innovation and inclusion.”
Although North Korea is said to rely on cryptocurrency funding for its operations, the overall share of illegal funds within the cryptocurrency space is minimal, with chain melting itself making it just 0.14% of all on-chain transactions.
At the same time, there are many reasons why people use privacy services. With all transactions visible on-chain, privacy services help people keep their transaction history and net worth private, which protects physical security.
Jameson Lopp regularly highlights in its physical Bitcoin attack repository, having information about Bitcoin disclosure can lead to violent home invasions, tricks and, in some cases, murders.
While the government’s ongoing crackdown on privacy services appears to be unproportionate to eliminating 0.14% of illegal actors, the Trump administration appears to be in no hurry to do the right thing to protect Americans and #Freesamourai.
This is a guest post by L0LA L33TZ. The opinions expressed are entirely unique and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
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