Do proponents claim that cryptocurrencies can get through US government sanctions set up an enormous dog whistle?
The founder of Tornado Cash says that it would be “technically impossible” to impose sanctions against decentralised protocols. Tornado Cash is a so-called “mixer” service that hides cryptocurrency transactions by fusing them with others.
Unexpectedly, the US Treasury’s Office of Foreign Assets Control has recently sanctioned Tornado, in part due to its usage by hackers who are allegedly involved in North Korean money laundering.
The “no sanctions yay” theory of cryptocurrency has recently taken a hit thanks to Tornado, which is down 95% from its all-time high and has had its source code removed from Microsoft Corp.’s GitHub. Former Ethereum Foundation scientist Virgil Griffith coined the phrase in 2019 when he advised a blockchain conference in North Korea on how to avoid sanctions by converting money into cryptocurrency. This costly advice led to a guilty plea and a 63-month federal prison sentence.
Even the most decentralised service can’t evade law enforcement, as evidenced by this technological demonstration. Exchanges and other service providers are under pressure to keep an eye on linkages to fiat currency, and it is possible to search through pseudonymous blockchains for transactions that seem out of the ordinary, like the earnings of North Korean cybercriminals who used Tornado. The cryptocurrency sector hasn’t yet been able to construct all of its infrastructure.
In a context of an economic Cold War, crypto is likewise struggling geopolitically rather than soaring. Washington has been exercising its financial muscles in the wake of the CoVid-19 pandemic and Russia’s invasion of Ukraine, despite worries about the potential fallout from overreach or alternative currencies.
Keeping crypto under control is essential for US soft power in times of war and accords with the history of US regulation of encrypted technology, such as the e-mail mixers of the 1990s.
