Treasury Sanctions Open Source Software
Early this morning, it was announced by the U.S. Treasury that Tornado Cash was added to the U.S. OFAC (Office of Foreign Assets Control) SDN list.
Early this morning, it was announced by the U.S. Treasury that Tornado Cash was added to the U.S. OFAC (Office of Foreign Assets Control) SDN list (the list of specially designated nationals with whom Americans and American businesses are not allowed to transact). Tornado Cash, a non-custodial open source software project built on Ethereum, allowed users to mix their coins through the use of the Tornado Cash smart contract, obfuscating the previous trail of the coins (which are of course being transacted across a transparent ledger).
The sanctions placed were particularly notable because they were placed not on an individual person or particular digital wallet address, but rather the use of a smart contract protocol, which in the most basic form is just information. The precedent set by these actions are not ideal for open source software development.
To quote CoinCenter,
“How is adding Tornado.cash to the SDN list different from past OFAC actions? A smart contract is a robot, not a person. It is software that resides on the Ethereum blockchain. If a contract is credibly decentralized then the original authors of that contract could be hit by a bus and the service would continue to work. As such, today’s action does not seem so much 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. It is not any specific bad actor who is being sanctioned, but instead it is all Americans who may wish to use this automated tool in order to protect their own privacy while transacting online who are having their liberty curtailed without the benefit of any due process.”
Tornado Cash has seen a large amount of volume across the history of its protocol, with over $7.6 billion of all-time deposits and over $40 million of withdrawals and deposits occurring over the last week.
All-time Tornado Cash statistics - Source: Dune Analytics
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