Last month, the Treasury abolished sanctions against Tornado Cash. In response, many resumed their calls to the Trump administration to drop the charges against Keonne Rodriguez and William Lonergan Hill, the developers of the Samorai -Tevebog, currently prosecuted in the southern district of New York.
What many seem to have missed is that the Treasury’s sanctions reverse Tornado Cash also revealed the State Treasury’s attitude to privacy services. And it doesn’t look good.
Tornado Cash’s removal from Ofac’s SDN list followed a lawsuit from Tornado Cash users in a Texas District Court case that has become known as Van Loon against the US Department of the Treasury, claiming the sanction of the software was illegal and violated the right to free utterance.
The trial went to appeal in the fifth circuit, where three judges gave up that the sanction of a software like Tornado Cash was actually illegal, as ofac’s SDN list was reserved for businesses, foreign nationals and property – as Tornado Cash is neither.
The fifth circuit, on its part, instructed Texas District Court to give the applicant’s proposal for partially concise judgment, which would constitute a binding judicial ruling that software like Tornado Cash cannot be sanctioned by the US government under current sanctions legislation.
Now the Treasury is fighting back in attempts to avert the verdict that will strip the agency of its powers to sanction unchanging privacy software by claiming that no verdict is needed because Tornado cash has been removed from the OFAC list. But without the verdict, the agency could continue to sanction software that acts as tornado cash, and even gene sanction Tornado cash itself.
The sanctions on the other way around on Tornado contains have suffered to do with the prosecution of the Samorai -computing book developers, as no agreements are indicted for sanctions evasion.
But the criminal prosecution of Tornado Cash Developer Roman Storm is extremely important to their case, as it may set a precedent for the prosecution of Rodriguez and Hill, which is accused of conspiracy to serve an unlicensed money transmitter and conspiracy to commit money laundering.
Both Tornado Cash and the Samorai-Tevebogen are in purely non-parenting authority projects, which have long been understood to be exempt from falling under the frame of money laundering that is usually used for banks. If Storm is found guilty in July, the government would also have a much easier time to prosecute the two Bitcoin developers.
While many were hopeful that the new administration would stop the former administration witch hunt on cryptocurrency developers, it seems that Trump’s Treasury is equally unfavorable to the development of the privacy code.
As context pointed out at the end of last year, a pro-crrypto administration does not necessarily respond to a pro-private and pro-financial freedom administration. It seems that we are now witnessing what it means: While litigation is being dropped against “crypto -cinemos” such as Coinbase and Uniswap, privacy software developers such as Rodriguez and Hill continue to face the threat of decades in prison.
The treasury seems to justify these prosecutions with their hardline attitude against terrorist financing and cybercrime. As the Agency wrote in the announcement of Tornado Cash’s sanctions Repentance:
“Treasury remains obliged to use our authorities to postpone and disrupt the ability of malicious cyclists to take advantage of their criminal activities through the utilization of digital assets and the ecosystem of digital assets.”
In what appears to be a first, the Treasury also issued a warning for Users of privacy services that say that “American persons must exercise caution before being included in transactions that pose such risks.”
In an E email relating to the reversing of sanctions against Tornado cash, blockchain monitoring company chainalysis looks to repeat the mood of the treasury and write that “organizations with exposure to [mixer] Addresses must seek legal advisor on their answers and obligations to OFAC. “
The message seems clear: Although it is not officially illegal to use or handle mixing services, the Treasury seems to try to keep all options open to pursuing fees against people involved in privacy services in the future.
As I have argued in several Bitcoin magazine print items, this attitude should not be a surprise and is rather an immediate consequence of integrating digital assets into US regulatory framework. The more importantly Bitcoin becomes for the government, the more important it will be to eradicate any behavior considered illegal or criminal.
Treasury secretary Scott Bessent has now claimed so much in Tornado Cash’s sanctions repentance, saying that “securing the digital asset industry from North Korea abuse and other illegal actors is important to establish US leadership and ensure that the US people can benefit from financial innovation and inclusion.”
While North Korea is allegedly dependent on cryptocurrency financing for its operations, the total proportion of illegal agents within the cryptocurrency room is placed minimal, located at only 0.14% of all transactions on the chain itself by chain analysis.
At the same time, the reasons why people use privacy services are several. As each transaction is visible on-chain, privacy services help people keep their transaction history and net value privately, which in turn protects their physical security.
As Jameson Lopp regularly highlights in his physical bitcoin striker depot, having information about your Bitcoin public can result in violent home invasions, kidnappings and in some cases murder.
The government’s continued crash on privacy services does not seem proportionate to remove 0.14% illegal actors, but it seems that the Trump administration is not busy doing the right thing to protect Americans and #freesamorai.
This is a guest post of L0LA L33TZ. Opinions that are expressed are entirely their own and do not necessarily reflect those from BTC Inc or Bitcoin magazine.