How the Tornado Cash incident shook the entire crypto community

In the beginning of August, the US Treasury included in the sanctions list the Tornado Cash cryptocurrency platform operating on the Ethereum network, as well as the virtual wallet addresses associated with it. The ministry believes that the service was used for money laundering — digital assets were bought with funds obtained illegally.

The regulator said hacker groups such as North Korea’s Lazarus Group used the mixer to launder money. We are talking about $7 billion starting since 2019.

Further, the alleged developer of Tornado Cash Alexey Pertsev, who lives in the Netherlands, was arrested. The local court decided to take the programmer into custody for 90 days. At the same time, Pertsev was not formally charged with a crime.

Almost immediately, USDC token issuing company Circle blocked the addresses associated with the cryptocurrency mixer. This jeopardized MakerDAO’s DAI stablecoin, which is more than 30% backed by USDC.

In this regard, ShapeShift CEO Eric Voorhees advised the MakerDAO community to quickly transfer collateral assets from USDC to other stablecoins that are more protected from censorship.

Tether has said it does not plan to freeze Tornado Cash addresses until the company receives a relevant order from law enforcement. But a Dune Analytics columnist claims that Tether has blocked more than 700 mixer-related addresses, totaling about $407.5 million.

Last Saturday, more than 50 people gathered to protest against the imprisonment of the developer of Tornado Cash in the center of Amsterdam. Some of them held signs saying “open source is not a crime.”

“It’s like writing a book about making cyanide or making a bomb. The authors have no control over how this information will be used by people. They don’t give them instructions for this cyanide or bomb to be used against society, and they don’t force people to do it. Therefore, having created the code for the protocol, the developer should not be considered an accomplice of criminals. He just wrote code that was technically used by attackers,” Charles Hoskinson, the founder of Cardano, spoke out in support of Tornado Cash developers.

And US Senator Tom Emmer turned to the US Treasury with a demand to explain the blocking of the mixer. According to the politician, the sanctions against Tornado Cash are nothing more than an attack on technology — a code that provides anonymity.

“The imposition of sanctions on neutral open source decentralized technologies raises a number of new questions that affect not only our national security, but also the right of every American citizen to privacy,” said Emmer.

The Tornado Cash incident shook the entire cryptocurrency community. Clients of the largest crypto-mixer have probably lost their money, and open-source developers fear a repeat of Pertsev’s fate. In addition, the prospects for the entire Ethereum blockchain are now hazy. How will events develop further?