Privacy is the main issue at hand when it comes to Defi advocates facing off against regulators. The future of the financial systems is at stake in the case of tornado cash.
Tornado Cash is a set of smart contracts on the platform. Zero-knowledge proof is used to ensure that there is no public link between the deposit address and the withdrawal address. That means the money is no longer tied to the user's past transactions in order to provide a layer of privacy.
In August, the Office of Foreign Assets Control (OFAC) imposed sanctions on 45 addresses associated with the platform, effectively banning Americans from using it. Hundreds of millions of dollars were stolen by North Korean state-sponsored hackers, according to the agency.
OFAC has approved addresses for foreign individuals before but never a smart contract. Peter Van Valkenburgh is the director of research at the coin center in Washington, DC. The contracts of OFAC can't be changed, blocked, or turned off by any of the Tornado Cash developers, according to the coin center.
The statute that gives OFAC power was never meant to be used to tell Americans which software tools they can use.
The Coin Center has filed a lawsuit against the Treasury Department in order to reverse the sanctions and prevent them from being enforced against ordinary citizens. The coin center argues that OFAC does not have the power to ban software tools. A lawsuit against the Treasury is being funded by the popular UScryptocurrencies exchange.
The project's website was taken down after the sanctions came down. The Dutch authorities have accused one of the developers of Tornado Cash, Alexey Pertsev, of being involved in money-laundering.
One of the founding members of Tornado Cash was Pertsev. Tornado Cash is an open source project and relies on a group of people. A request for a comment was not responded to by Roman.
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