Currency Mixer Tornado Cash Sanctioned by US Treasury

The US Treasury Department sanctioned virtual currency mixer Tornado Cash which it says has been laundering money since 2019. TRM Labs head of legal and government affairs, Ari Redbord, talks about regulation in the space on “Bloomberg Crypto.”

All right you know we were talking with jesse about this because one of the fundamental reasons for the invention of bitcoin is to skirt this kind of monetary censorship and yet uh here we see all of the companies that have been involved in it for you know the first decade of its life um following treasury orders does that make sense to you it does it it does for a

Number of reasons look i think the way the u.s treasury was thinking about these sanctions is they were going after a what they saw as the chief money laundering tool for north korea cyber criminals and you know we’ve seen these huge hacks in the crypto space over the last year or so which in many respects when they involve north korea move this issue from sort of

A fraud and financial crime issue which is still very serious to really a national security issue and i think that the challenge now that we’re seeing in the space is and this is to jesse’s point look we have to figure out ways to go after illicit actors like north korea who are taking advantage of decentralized tools but at the same time not affect what he called

Sort of you know legitimate users because there is you know more and more need to have transactional privacy as we move into sort of this new open financial system so it’s really figuring out sort of how to walk that line between stopping bad actors from using sort of you know these tools and allowing legitimate users to continue to use them i just want to point

Out it doesn’t get any more private than duffel bags full of benjamins i mean laundering dollars is surely much easier because you don’t have a blockchain to trace at all i get that tornado kind of helps people make the blockchain less effective but what do you think about a company like tether which has been um which has been resistant to treasury’s demands to

Freeze any uh assets that have touched tornado does that make sense or do they have to do it you know it does make sense and and i’ll tell you why look you know i think there’s a couple ways if you are a you know a crypto company and that means a stable coin issue or like tether uh a defy uh protocol um like some of the ones that have been involved in some of the

Conversations around this uh look you have to if you if you are a us person or u.s entity you have to abide by ofac sanctions it’s very black and white and even tether what tether is saying in their statements is hey look we’re going to block the addresses that are on the what they call the sdn list especially designated national list the ofac sanctions list we’re

Going to block those addresses but what we’re not going to do is go ahead and take a step further and block addresses that have transacted with sanctioned addresses and um i think sort of tether is saying look and a lot of the crypto industry is in line with this and that is look what we need before we take that next step is more guidance from ofac more guidance

From treasury and regulators um so what to be clear tether is not saying hey we’re not going to abide by sanctions but they are saying we’re not going to take that extra step to block addresses that have transacted with sanctioned addresses and i think this goes to sort of crypto businesses right now are all trying to navigate and at trm this is what we do we’ve

Been working with them to do this to come up with what is their risk appetite and how can they use data to make informed decisions about which addresses to block ari you underscored the need for privacy in the sphere as well for someone who’s perhaps not as familiar with tornado cash and the uses for it compare and contrast if you will the u.s banking system for

Example and the privacy associated there or i should say lack thereof when it comes to things like tracking money laundering for example how does tornado cash or the concept rank in that no look i love the question i was a prosecutor at the u.s department of justice for about 11 years and i can tell you that you know there there’s there’s no trm to trace both cash

Smuggling and networks of hawalas and shell companies and high value art and i think you know look what the blockchain allows for is unprecedented visibility uh on financial transactions it allows you to follow the funds and on the one hand that’s a great thing right it allows financial crime investigators to follow the money in ways that were impossible before but

On the flip side you know look as more and more transactions are done in an open way people are going to have more and more reason to have uh to want privacy in those transactions look you know if you know eventually hopefully we’ll all be paid in crypto right uh you don’t necessarily want bloomberg to uh to know every transaction you do with that paycheck right

There’s going to be reasons why you’re going to want to have privacy more and more and there are tools like tornado cash that allow for that the problem is again uh these same tools are being able being used by illicit actors like north korea who also want more privacy in their transactions and that’s the fine line that we’re seeing regulators and crypto businesses

Try to walk today and i i yeah please well first of all i think that’s uh fascinating and we could go on about that for a long time but it also makes me think about um cbdc’s why does the us drag its feet on issuing a central bank um a digital currency you know i think it’s i think this is happening globally i think certainly the us uh is is is obviously taking

Its time we’ve seen this this this conversation from the executive order and from the fed about studying spending time studying at cbdc but i think the reality is the us is not ready today to say hey look cbdc is even the right move here um you know compared to you know stable coins and cryptocurrencies and other types of assets you know in the private space so

I think i don’t know that it’s as much dragging its feet as really kind of trying to study and understand the issue i think there’s a narrative that um sort of the u.s is behind china uh in particular in sort of the cbdc space race if you will and i think the reality is still still based on the hegemony of the u.s dollar and that could change um i think the us is

Sort of very much still in the game but it really has to decide whether or not it’s a country that’s going to move forward with the cbdc and i think that’s a very much we’ll see a situation at the moment

Transcribed from video
Currency Mixer Tornado Cash Sanctioned by US Treasury By Bloomberg Markets and Finance