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(Kitco News) – A full week after the U.S. Treasury Department announced sanctions against popular cryptocurrency mixer Tornado Cash, the move has begun to have a major impact on the entire decentralized finance (DeFi) world. I’m here.
Days after the announcement, law enforcement actions began to ramp up around the world. One of the biggest developments was the arrest of Tornado Cash developer Alexei Pertsev on Aug. 10 by the Dutch Office for Financial Intelligence and Research (FIOD), sparking outrage from the wider crypto community. .
Pertsev’s arrest marks a significant escalation in the global crackdown on decentralized protocols, and marks the first time a government agency seeks to assign criminality to the programmers who wrote the code.
Authorities have arrested the 29-year-old developer on suspicion of concealing a criminal flow of funds and facilitating money laundering via Tornado Cash, according to FIOD.
“Our investigation found that at least $1 billion worth of criminal-origin cryptocurrencies passed through the mixer. Yes,” said FOID.
Pertsev’s arrest signals that the world is moving to a new global paradigm of regulation. This includes the expansion of government oversight into the world of smart contracts, a disastrous development for DeFi participants.
Coin Center Statement on Tornado Cash:
US Treasury Department sanctions on privacy tools place drastic restrictions on all Americans. The Sanctioned Tornado Cash smart contract is a tool, not a person. https://t.co/9t2Vtzp8z5 pic.twitter.com/x5aS9iHfRI
— Neeraj K. Agrawal (@NeerajKA) August 8, 2022
The immediate concern is that other decentralized protocols may be subject to regulatory enforcement actions that are about to reign supreme in the industry. Many popular his DeFi protocols have already taken steps to prevent regulatory crackdowns by blocking users associated with sanctioned Tornado Cash addresses and denying them front-end access to sanctioned territories. I am teaching.
Platforms active in this space include decentralized exchanges Uniswap, 1inch, Balancer, dYdX, Github, Circle, Alchemy, Aave and Infura.
Influencers targeted in dust attacks
The story took an interesting turn over the weekend, as a number of prominent influencers in the crypto industry began reporting being blocked by some DeFi protocol web applications.
Further investigation revealed that anonymous users randomly sent small amounts of Ether (ETH) to over 600 addresses in an attack known as a “dust attack” from Tornado Cash Mixers.
Sanctions introduced by the Treasury Department require all addresses that have interacted with Torando Cash to be added to a blocklist, so these 600 address We are now prohibited from interacting with protocols that fall into that category and attempt to evade regulators.
Some of the crypto influencers affected include Tron founder Justin Sun and Coinbase CEO Brian Armstrong, as well as mainstream celebrities such as Jimmy Fallon, Shaquille O’Neal and Dave Chappelle. increase.
Luckily for those affected by this hoax, simply receiving cryptocurrency from Tornado Cash is unlikely to lead to criminal prosecution. Because the law requires “deliberate” involvement with mixers to warrant action from authorities.
Nonetheless, this first enforcement action against essentially artificial intelligence-controlled smart contracts raises concerns about the future of the DeFi industry, especially now that US Treasury Department sanctions appear to apply to non-citizens. .
Disclaimer: The views expressed in this article are those of the author and may not reflect the views of the author Kikko Metals Co., Ltd. The author has made every effort to ensure the accuracy of the information provided. However, neither Kitco Metals Inc. nor the authors can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation of an exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the authors of this article accept no liability for loss and/or damage resulting from the use of this publication.