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Tornado Cash: The World’s First Sanctioned Robot?

Chris Campbell

Posted August 09, 2022

Chris Campbell

Yesterday, on August 8, the Treasury sanctioned a smart contract.

More specifically, it put a sanction on Tornado Cash, an open source privacy tool for Ethereum.

The rationale is that North Koreans relied on it to launder illicit gains (which, by the way, I don’t doubt), therefore Americans shouldn’t be able to use this tool.

The list that Tornado.Cash appears on — called the List of Specially Designated Nationals and Blocked Persons (SDN List) — is 1,194 pages long. Its stated purpose is to fight money laundering and terrorist financing around the world.

SDNs on this list are typically involved in terrorism, trafficking, or weapons proliferation.

But the latest sanction has a different ring to it. It’s a far cry from what usually hits the SDN list.

And it points to one of the biggest questions in our digital age: the average individual’s right to privacy.

The First Sanctioned Robot?

By the way, this isn’t the first time crypto has graced the SDN list: Bitcoin addresses have been added in the past. The difference here is that, previously, the rationale was to target a specific person in control of that address.

The SDN listings in the past were targeting a specific person, not a specific technology.

Here, rather than being aimed at those committing crimes, this sanction is aimed at every single American citizen.

As Coincenter put it:

“In this case, the sanctions laws are being used to create a limitation on spending money not merely with some person who has been found guilty of a crime or even suspected of terrorism. This is a limit on any American who wishes to use her own money and a freely available software tool to maintain her own privacy—including for otherwise entirely legal and personal reasons.”

This is also the first time a government body is treating a smart contract — open source, self-running software (arguably a robot) — as a sovereign entity.

It’s an unprecedented move. And it’s only going to get more interesting from here.

And, as said, it raises important questions about the future of financial privacy.

There are totally legitimate reasons for people to want privacy from a credibly neutral tool, especially if you believe (like us) that crypto is here to stay and headed for mainstream adoption.

It’s a tightrope that both regulators and cryptonauts are going to be forced to walk.

Unless, of course, regulators go for the nuclear option and plan to build the world’s first billion-page (plus) blacklist.

Or… perhaps these recent moves point to a bigger play in development: a CBDC.

Just the Beginning?

Yesterday, we talked about why this is just the beginning of a great crypto crackdown.

Those crypto projects that emerge on the other side of this shake-up will become the BIG winners.

The move by the Treasury is obviously a HUGE example.

Anyone in the U.S. can no longer work on Tornado Cash, run its software, download its software, visit its website, or interact with its smart contract.

Moreover, if you’re found out of compliance, you could also face up to 30 years in jail.

There are a few BIG problems with this approach (and a lot of unanswered questions), which I’ll dive into tomorrow.

One of the problems has to do with a simple four-letter word: fork. (Or, the ability to copy and iterate Tornado Cash’s code infinitely.)

Stay tuned for that.

Here’s what we’ll leave you to ponder today.

CBDCs are Coming.

Everything you see here is just a small taste of what’s possible with CBDCs.

Central banks will have total and unerring control over every aspect of your financial life.

And, if you think CBDCs are still years away, think again.

Biden recently sent the warning shot.

Do you remember where were you on March 9, 2022?

Jim Rickards outlines why this date is important — and how to prepare for what comes next — right here at this link.

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