The many ripples of the Tornado Cash arrest of Alexey Pertsev
Sanctions against crypto mixer Tornado Cash have caused repercussions in the community
Good afternoon, friends!
The arrest and detention of Alexey Pertsev, a developer of the Tornado Cash decentralized crypto mixing service that was sanctioned by the US Treasury Dept. earlier this month, has sparked community protests.
More than 50 people gathered in Amsterdam’s Dam Square not just to protest his arrest, but also to bring awareness to the fact that this is the first time that the US has sanctioned a piece of software instead of individuals or state actors.
Experts have weighed in that this case could be fundamental to the entire establishment of crypto and fundamental to participating in coding and interacting with open-source projects.
Dutch authorities arrested Pertsev alleging that he was involved in “concealing criminal financial flows and facilitating money laundering” through the service. Although he is currently being detained, Pertsev has yet to be charged with any of the laws he allegedly broke.
Although services such as Tornado Cash can be used to hide the proceeds from criminal enterprises, they can also be used for legitimate purposes. In fact, Vitalik Buterin, Ethereum co-founder, said that he had used the system in order to donate to Ukraine.
However, that’s not ultimately the problem that the crypto community is facing with Pertsev’s arrest. Right now, Dutch authorities are making it appear that he was in control of funds passing through Tornado Cash and thus participated in illegal traffic when he was a developer who submitted to an open-source project.
The end result of these accusations and his arrest is that developers in DeFi and the Web3 space will hesitate before joining projects. It has never been controversial to say that code is speech.
The ripples don’t stop there, of course, as other projects have taken notice of what happened to Tornado Cash and Pertsev.
MakerDAO, the issuer of the DAI stablecoin, announced shortly after the US Treasury sanctions that it had made plans for an emergency shutdown should it too get sanctioned. This is because after Tornado Cash was targeted, many of the USDC wallets associated with it were frozen. The DAI stablecoin reserves are mostly held in USDC currently and, if they were targeted, DAI would be doomed.
On the other side of the coin, in the US, Coin Center signaled that it intends to fight back against the US Treasury ban on Tornado Cash. The crypto advocacy group said that the Treasury overstepped its bounds and cited Constitutional violations in its pending challenge.
As usual, keep reading for a short bulleted list of the news this week and after the fold (in the paid section) you’ll find a longer discussion describing what’s happened. These chilling events may yet have further ripples that we can’t know, so developers and members of the community may need support or think about what this means.
See you next week.
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Coin Center announces plans to challenge Tornado Cash ban. The non-profit crypto policy watchdog said that it plans to challenge the US Treasury’s blacklist of the Tornado Cash crypto mixer in court on Constitutional grounds, reported Decrypt.
MakerDAO makes contingency plans to shut down if sanctions hit DAI. In the wake of sanctions against Tornado Cash, DAI stablecoin issuer MakerDAO makes plans for an emergency shutdown in case it gets sanctioned by the US government, reported The Defiant.
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