Back from my friend’s bachelor party and I am alive, woohoo!

I shared with my WriteWeb3 crew I was planning to take a break from writing today and catch up on e-mails, and other to-do’s from the long weekend.

Well…I changed my mind pretty quick.

Also, short and sweet means a full-on TPan post…it is what it is.

As the title suggests

There’s a big development around a tool called Tornado Cash — it has been sanctioned by the US government and is creating some immediate ripple effects in the space.

Please note that I am not an expert on this topic and it’s still developing. However, I think it’s big enough to share with y’all.

Earlier this morning, US Secretary of State Athony Blinken tweeted the following:

Why is this tweet a screenshot? Well, it’s factually incorrect. Tornado Cash is not a North Korean hacking group.

ameen @ameensol

@SecBlinken @USTreasury actually @TornadoCash is a smart contract deployed by a US/European dev team, was funded initially by @MolochDAO and is used for protecting personal privacy if you want to talk to us you know where to find us @ethereumJoseph @VitalikButerin @ConsenSys @ethereum

4:02 PM ∙ Aug 8, 2022

349Likes64Retweets

The original tweet was deleted and edited that a North Korean hacking group has used Tornado Cash, hence the sanction.

Secretary Antony Blinken @SecBlinken

We’ll continue to aggressively pursue actions against currency mixers laundering virtual currency for criminals. Today, @USTreasury sanctioned virtual currency mixer Tornado Cash, which has been used to launder money for a U.S.-sanctioned DPRK state-sponsored cyber hacking group.

4:24 PM ∙ Aug 8, 2022

1,227Likes304Retweets

Additionally, the US Department of Treasury has shared a list of sanctioned wallets along with Tornado Cash.

OFAC = Office of Foreign Assets Control

SDN = Special Designated Nationals and Blocked Persons List

So what does all this have to do with Tornado Cash?

@BowTiedIguana breaks it down for my pea-sized brain

BowTiedIguana @BowTiedIguana

READ THIS THREAD OR GO TO JAIL FOR 30 YEARS (sorry not kidding) Tornado Cash added to US sanctions list - $437m of assets blocked. What is OFAC, what are sanctions, and what does this mean for DeFi 👇

4:45 PM ∙ Aug 8, 2022

1,158Likes401Retweets

And here’s the summary:

• OFAC administers and enforces sanctions against high profile individuals (eg: terrorists) and countries that are hostile to American interests. The list of those individuals/countries is SDN.

• It is illegal for any US person (including companies) to engage and in any trade or economic transactions with the SDN list. Big fines and jail time for any violations.

• Addresses holding non-ETH assets (eg: USDC and Tether) can have their assets frozen by the issuers of those assets as they are created by companies. For example with USDC, Circle (issues USDC) has moved quickly to freeze the addresses listed on SDN.

Source

This part of the tweet thread caught my eye

I’m assuming this is for anyone that interacts with Tornado Cash after the announcement. That said, I will admit that I visited Tornado Cash once last year just to see what it looked like and how it worked. I had no reason to use and did not use it (too poor to 😂).

So why the fuss?

To the average person (including myself for the most part), this is not a big deal. And I believe that a percentage (who knows how much) of Tornado Cash users are doing it for criminal reasons. Also, for those that use Tornado Cash for criminal reasons, it doesn’t mean they won’t get caught. It’s harder though.

However, this can also be interpreted as a war on privacy.

Jake Chervinsky @jchervinsky

For years, @USTreasury has carefully distinguished bad actors from the neutral tools & technology that they (plus everyone else in the world) are able to use. The decision to sanction @TornadoCash, a decentralized protocol, threatens that smart & balanced approach to crypto.

6:30 PM ∙ Aug 8, 2022

610Likes157Retweets

Jerry Brito @jerrybrito

Today’s action does not seem so much as a sanction against a person or entity with agency. It appears instead to be the sanctioning of a tool that is neutral in character and that can be put to good or bad uses like any other technology.

coincenter.orgU.S. Treasury sanction of privacy tools places sweeping restrictions on all Americans - Coin CenterSanctioned Tornado Cash smart contract is a tool, not a person.

3:42 PM ∙ Aug 8, 2022

594Likes173Retweets

In my naivety, I was curious what some other smarter people than me thought, and this response stuck out to me. Also, this conversation is what made me decide to write about this topic today instead of taking a break 😂

These examples are a little extreme, but the point is a good one.

Because the Secretary of State says that there is one bad actor that has used Tornado Cash, does that justify banning it in the US?

How many murders from hammers in the US before we ban those — 10, 100, 1000?

There were 393 murders in the US in 2020 from blunt objects including hammers 🤔

Another way of thinking about this is from my previous life in the mobile growth world. Apple got rid of an advertiser identifier last year in the name of protecting its users’ privacy. However, they still have the data and use it for their own purposes. Coincidentally, Apple’s Ads business has grown a lot since they got rid of that identifier. Just a coincidence 😉

Are we ok with that? The average person probably is (they also don’t think about this lol) since most Apple users love Apple…but there are parallel themes going on. A good overview about what’s going on there:

Eric Seufert @eric_seufert

APPLE ROBBED THE MOB'S BANK: How Apple's App Tracking Transparency (ATT) policy blew up the digital advertising ecosystem, bolstering its ads business while positioning itself as a champion of consumer privacy. A masterclass in corporate strategy. (1/X)

mobiledevmemo.comApple robbed the mob’s bank, part 3 | Mobile Dev Memo by Eric SeufertApple robbed the mob’s bank, part 3. Mobile marketing and advertising, freemium monetization strategy, and marketing science. Mobile Dev Memo.

1:02 PM ∙ Aug 4, 2022

1,020Likes207Retweets

Nothing weird, move along. WE LOVE APPLE.

So what else is notable with this ongoing development?

• Will there be a formal framework or criteria for the government to justify banning a particular Web3 protocol or product? If the government can ban a product because of one bad actor using it, will there be more?

• Although it is much harder, government agencies have been monitoring mixers like Tornado Cash closely for a while

Source

• What will the future of blacklisting look like? We’re seeing this happen in real-time as mentioned above. There will be many edge cases and limitations, but it will happen. Note that the US can ban Tornado Cash and associated wallets, but cannot shut it down. It lives on the blockchain after all.

• Is this a battle against criminal activity or something else? This is a trick question because it can be both. There is criminal activity through Tornado Cash, but there are also plenty of users that use the same protocol for privacy purposes. Yes, people in crypto who are not are big on privacy for principle’s sake.

A lot more moves will be made and the dust will not settle for some time. If anything, it’ll continue to get kicked up.

See you tomorrow folks. Back to 💯 soon.