The Hard Truths and Worrying Consequences of the Tornado Cash Verdict

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As a crypto investor, I’ve always had my suspicions about Tornado Cash due to its inherent ability to obscure transaction origins. It was clear to me that this mixer service existed primarily to conceal identities, making it an attractive tool for criminals. However, if its sole purpose were privacy protection for individuals like peace activists or political dissidents, as in the case of Vitalik Buterin sending funds to Ukrainian activists with a stopover at Tornado Cash, then it wouldn’t be so controversial.

Additionally, mixing resources from various origins, some legal and others questionable, often raised suspicions of money laundering activities.

Tornado Cash’s creators didn’t handle the funds themselves, meaning they didn’t personally facilitate money laundering activities. However, they constructed an unyielding smart contract without implementing typical checks and balances that financial institutions use, such as collecting user identification information for investigation purposes.

As an analyst, I would put it this way: In the case against Pertsev, the Dutch prosecutors maintained that my actions, along with those of Roman Storm and Roman Semenov, were deliberate. We, as the accused, allegedly made a conscious series of decisions regarding the design, maintenance, and marketing of our mixer.

See also: Tornado Cash Devs Are Caught in a U.S. Dragnet | Opinion

As a researcher studying the intersection of law and cryptocurrency, I believe the judgment passed by Dutch courts against Alexey Pertsev appears unfair and disproportionate considering the novelty of Tornado Cash technology and its legitimate applications. The inherent features of blockchain, including decentralization, disintermediation, and censorship resistance, do not neatly fit into traditional regulatory frameworks. Therefore, a more nuanced legal approach is warranted to adequately address these complexities.

As a crypto investor, I can understand how Pertsev argued that users held ultimate control over their funds in the Tornado protocol, making them responsible if any illegal activities occurred. However, it’s essential to note that despite this user autonomy, Tornado’s developers did provide a frontend for more than 90% of users to access. This means that while users bore the responsibility, the developers still played a role in facilitating their actions.

The consequences of this are potentially risky. As Money blogger J.P. Koning explains, if individuals could easily avoid the obligation of constructing and releasing a tool they suspect will be misused by criminals, there would be a significant motivation for anyone looking to enable illegal activities to replicate Tornado Cash.

As a researcher studying the impact of Tornado Cash on anti-money laundering measures, I’ve discovered that if this privacy protocol were widely adopted by payments companies as a shield against money laundering charges, the effectiveness of efforts to combat financial crime would be diminished. This isn’t due to any intentional softening of rules through democratic processes, but rather because financial institutions have found cunning methods to circumvent them.

See also: Cloning Tornado Cash Would Be Easy, but Risky | Opinion

As a researcher examining the case against Pertsev, I cannot help but express concern over several problematic elements. Among the most concerning is the judge’s declaration from the bench that Tornado Cash had “no legitimate use.” This statement seems to equate privacy with illegitimacy, as if shielding one’s blockchain transactions was a criminal act in and of itself. However, there are numerous legitimate uses for anonymizing transactions on the blockchain. The authorities appear to have taken a broad view, deeming every dollar that flowed through Tornado Cash as potentially suspect.

It’s important to clarify that developers do not have control over how users interact with or utilize immutable smart contracts once they are deployed. Misconceptions persist, however, leading to the alarming implication that developers bear responsibility for such usage. This misapprehension not only misunderstands the fundamental principles of smart contract protocols but also poses significant liability risks for anyone involved in creation, extending beyond software development.

Can gun manufacturers be sued for shootings? Who bears the responsibility if cash is involved in criminal acts in the U.S.? The inconsistency in Pertsev’s case raises concerns. According to the DeFi Education Fund’s amicus brief, “Without a clear boundary, almost every creator of open-source software would face potential criminal liability for actions beyond their influence long after the fact.”

As a crypto investor, I ponder if this development implies that governments will start taking legal action against disadvantaged developers, particularly those working in industries with political disfavor. Time will tell. However, it’s essential to recognize that mixers aren’t merely tools for privacy and human rights protection. If they are used to facilitate illicit activities, law enforcement agencies will be determined to shut them down.

And if they can’t, someone is going to be held responsible.

See also: Stop Attacking DeFi Founders for Complying With Sanctions | Opinion