“A major political problem”: Circle CEO criticizes Tornado Cash sanctions

Crypto industry leaders are speaking out against the US Treasury’s decision to ban Tornado Cash.

Circle co-founder and CEO Jeremy Allaire joined a growing list of major crypto-currency industry players to speak out on the issue today, posting a tweet expressing his concerns about the Treasury’s decision to ban sanctioning all Ethereum addresses associated with the popular crypto-currency mixer.

1/ Yesterday, US Treasury designated for sanctions ETH addresses associated with Tornado Cash. As a US regulated FI subject to Bank Secrecy Act (BSA) requirements, Circle, together with our partner @coinbase, restricted the movement of USDC funds in these sanctioned addresses.

– Jeremy Allaire (@jerallaire) August 9, 2022

The U.S. Treasury announced that it had banned Tornado Cash and its smart contracts on Monday. In a press release, the U.S. Department described the protocol as “a virtual currency blender that launders the proceeds of cybercrime.“He said $7 billion had been laundered through the protocol since its launch.

Tornado Cash is an Ethereum-based protocol that helps users maintain their privacy by hiding their transaction history. While it is a popular tool within the Ethereum community, it has also been used repeatedly by hackers, including the North Korean state-sponsored cybercrime syndicate. Lazarus Group because it offers a way to launder crypto assets with relative ease.

According to Jeremy Allaire, the sanctions mark a turning point in the history of blockchain technology, as the U.S. government targeted a piece of open source software rather than a specific entity. Jeremy Allaire stated that this decision raises “extraordinary questions about privacy and security on the Internet.“

Jeremy Allaire noted in an article that while Circle had an obligation to comply with the law, he believed that the sanctioning of the protocols was a “major political issue.“He said Circle would engage crypto industry leaders, legislators, associations, developers and regulators to develop a legal framework and policies that would protect consumer privacy while respecting the “financial integrity principles…designed to thwart bad actors.“

In response to the Treasury’s ban, Circle quickly complied and blacklisted the sanctioned addresses, freezing over $75,000 in USDC in the process. Other entities, such as Github, Infuria, and Alchemy have since done the same.