2. Here are two nuanced arguments about each that I’ve seen:

Communications privacy is good in the small and mirrors the world with earlier technology with some differences. In the large it can allow maintaining much larger conspiracies than were previously possible with private meetings. One may consider it acceptable from a privacy and free speech perspective to allow secret communication in small groups but less secret communication in large groups. Indeed for political speech in a modern democracy you generally want it in public anyway, and WhatsApp and signal have small group sizes so you get this anyway. For very large groups, leaks seem hard to avoid. A counter argument might be that militaries / companies are in some sense like conspiracies in the way they want to keep state/trade secrets. However in typical democracies there may be document release schedules/transparency laws and internal company information may be revealed through patents, subpoenas, or just plain old leaks.

The money argument is that whereas people typically have similar amounts of private speech, some people have many orders of magnitude more money than others. Privacy for communication is then reasonably fairly distributed across the population (though those with more to hide may gain more) whereas privacy for money is mostly an advantage for the people with lots of it. Giving the people who are already rich and powerful this kind of advantage in avoiding scrutiny/taxes may not be considered fair or desirable. A counter argument could be that it is unfair for the rich to be exposed to such increased scrutiny merely because of their money.

I think it is very fine to discriminate against people based in things that give them enormous power, quality if life and they can easily get rid of. Unlike being discriminated and scrutinized for having no money , you can easily escape scrutiny due to wealth by giving away wealth with no meaningful reduction of quality of life (after a given point)

In fact I’d say people with lots of money are most able to cope with the costs associated with their privacy being violated.

I’m by no means rich and I’m sometimes getting into KYC hell because my passport have the wrong color. Banks will often flag poor people for the slight things and demand impossible documents. You send the required documents and they keep saying that’s not enough and requesting more and more documents.

I had this debit card company asking me for criminal records (never committed a crime, financial or not) in english and translated by a trusted entity. I’m from a portuguese speaking country and live in a slavic country. I don’t think they were actually expecting me to send those impossible documents and more like the platform wanted me out.

Banks will ban you because you are not worth the risk. They call this “de-risking”. Meanwhile rich people can just hire someone to handle the requests and as we often see in billion dollars money laundering scandals the bank might even turn a blind eye for a while if there is profit in it.

To add fuel to the fire many KYC/AML proponents will justify this abuse by trying to say in a polite manner that its your fault for having born in the wrong place. I’ve actually seen fervent self proclaimed anti-racist pro-immigration people agree with this kind of abuse.

Racism and xenophobia are alive, well and officially sponsored by the general population through the guise of financial crime laws.

Why is that strange?

Financial 'privacy' allows corporate interests to buy government officials or just buy governments, it allows despots and oligarchs to move money with impunity, allows dictators to steal mercilessly from their people and 'clean' the money in other nations. And yes, it allows terrorists, drug dealers and criminals to go about their business too.

These are not identical concerns to privacy of speech. To paint them as such seems overly reductive.

> Are we really any safer now than we were then?

We are certainly better able to fight corruption and laundering of dirty money in the west than we have been in the past, yes. Are we 'safer'? Who knows, but it's about a lot more than a bit of cocaine, it's about the integrity of democracy itself.

Oh please, this has nothing to do with Democracy. Democracy literally means citizen-power, while this enforcement is removing the power of citizens to come to consensus on which money they want to use. The day there's a fair election at the federal level on any core economy-related topic, then your argument could begin to have something to stand on, but right now it doesn't. This is strictly shifting power away from citizen into the hands of a few.

> The day there's a fair election at the federal level on any core economy-related topic, then your argument could begin to have something to stand on, but right now it doesn't.

Just because your system is already broken doesn't mean it's a good plan to enable it to be outright bought.

> This is strictly shifting power away from citizen into the hands of a few.

Bullshit. That is exactly what so-called financial privacy does. "The many" are not incentivised to hide their financial movements because they are uninteresting. "The many" are not using ethereum-based money laundering tools, nor will they. Cryptocurrency in general is already a niche activity of techbros and crimininals. The very, very few.

> "The many" are not using ethereum-based money laundering tools, nor will they. Cryptocurrency in general is already a niche activity of techbros and crimininals. The very, very few.

This consensus process is very real. Money, like language, is something that is only useful when shared, gains importance with increased usage, and eventually becomes unavoidable once it reaches a certain level of adoption. That's why people use dollars, and that's why they may end up using crypto, unless some authoritarian interventions disturb the democratic process of adoption.

> it's sanctioning a criminal money-laundering operation

The Tornado developers are clearly not criminals, or sponsored by criminals. You can talk to them at technical crypto conferences. This is a very different clique from the shady operators of centralized crypto platforms you likely hear about a lot in the news (Binance, Nexos, ...), who certainly did have many links to criminal organizations, and did intentionally help launder money.

And if we disregard intention when calling something a "criminal operation", is the federal reserve criminal for having issued untraceable paper dollars? It's certainly possible to imagine a money system with strict tracing, yet they didn't implement that. It's almost like privacy is not criminal.

Actually this already happens and has happened in many, many countries and time periods. Cities, even private companies, used to mint their own currencies. Nowadays many countries' people use the USD informally. Touristic spots often accept many different currencies. Bitcoin has been accessible to anyone on Earth for almost 13 years. There's nothing catastrophic about it, this is just how the world works.

> I mean... clearly not. 'criminal' is not some sort of moral status that can be waved away by saying "but they mean well", or applied to people doing things you can draw vague parallels with.

The comparison between a service that allows anyone to anonymize traceable-by-default currency (Tornado), and issuers of an anonymous untraceable-by-default currency (the FED) isn't a "vague parallel", it's fundamental. Both were legal at the time of their creation, one got declared illegal, allegedly because it got popular with North Korean hackers.

Few of the examples there are of people "democratically" choosing one currency over another, some of those (company currencies) are pushed from the top down in an unaccountable organisation and are generally acknowledged to be a bad thing. Tourist spots accepting one currency over another means little.

> There's nothing catastrophic about it

A country allowing their own currency to die in favour of a cryptocurrency would pretty much be a catastrophe by definition, involving a failed currency.

> isn't a "vague parallel", it's fundamental

It's a very vague parallel, because one is a state actor, operating with democratic oversight, and the other is a money-laundering operation. You asked if the fed was criminal because of its actions - writing it off as a vague parallel was my way of not just directly calling you an idiot. "Criminal" is a matter of criminal law, and the central banks are established by law. So no, the fed is not a criminal enterprise by definition.

> Both were legal at the time of their creation

I would dispute that Tornado Cash was ever legal, because it explicitly enabled KYC and AML-less money laundering. It just flew under the radar for a while.

FYI most dollar transfers are very traceable, with the right authority, and this is what's missing from a system like Ethereum in general. All this talk about financial privacy misses the fact that financial privacy has been a limited right for a long time - you have financial privacy from your neighbours, sure, but with the right judicial approval that can be stripped away. Making something mathematically impossible to trace is a whole different level and it's not at all surprising that a) it attracted criminal use and b) that the state seeks to shut it down.

So I'll say again - if a money-laundering facility is essential to your adoption process, your process is all sorts of wrong, and the world is a better place without it.

https://www.tandfonline.com/doi/pdf/10.1080/25741292.2020.17...

This is the "proportion of criminal funds recovered" [1]. So of the $1.6 trillion laundered out of $2.1 trillion of estimated criminal proceeds, only a few billion were confiscated or seized.

The author then argues for reducing fines on banks and financial institutions, increasing criminal asset forfeiture regimes and moving away from suspicious transaction reporting. (I agree with Nos. 2 and 3; for No. 1, I'm skeptical given the author is a consultant [2].)

Tornado's sanctions were imposed by OFAC. From what we can tell, it wasn't AML reporting but criminal investigations that yielded the tip. Your source thus refutes your argument. Following the author's prescription, we'd now work to investigate everyone around Tornado and seize their assets if they're doing anything illegal.

[1] https://www.tandfonline.com/doi/pdf/10.1080/25741292.2020.17... page 82

[2] https://www.amlassurance.com/better-outcomes.html

Criminal asset forfeiture is not civil asset forfeiture. You need to actually prove someone committed a crime that generated the assets, in order to seize them, and the burden of proof is that of criminal law: beyond reasonable doubt, which is much higher than the preponderance of evidence standard of civil law.

>>Following the author's prescription, we'd now work to investigate everyone around Tornado and seize their assets if they're doing anything illegal.

The author didn't suggest investigating any one who privately transacts, but in any case, what you describe would be far more just than the current situation, where all Americans are having their right to use TC denied, under the pain of sanctions law, as a roundabout way of punishing North Korea.

The author is speaking to a global audience and using those terms colloquially; I parroted their language.

Table 1 [1] mentions "proportion of confiscations attributed to anti-money laundering policies" as its operating measure (and only has columns for Europe and global). Figure 3 [a] measures total US asset forfeitures, which covers both criminal and civil forfeiture [2].

So yes, the paper's prescription would involve investigating, freezing where suspicious, charging and seizing assets. The success metric uses confiscated assets as its numerator.

To be clear, I'm advocating for none of this. Just refuting that source and the figure quoted for AML programmes' success rates. The paper doesn't speak to anything about OFAC, but instead to what should and shouldn't be done after an entity is sanctioned or deemed a suspect.

[1] https://www.tandfonline.com/doi/pdf/10.1080/25741292.2020.17... page 88

[a] page 84, bottom

[2] https://www.justice.gov/afms/about-asset-forfeiture-program-...

I’m showing why a source is irrelevant to an argument, in part because of some unintuitive jargon. (Though the part quoted by the original comment is straightforward for anyone who reads the paper and the definitions around the 0.2% figure.)

If one takes directly the paper’s suggested endpoint, seized funds as a measure of programme success, it counters the gist of OP’s argument.

> release they put out highlights the allegation of TC being used for money laundering, and sanctions enforcement is one of the objectives of AML programs

AML, in the paper’s context, begins and ends with banks telling on suspicious accounts. For detecting money laundering. TC was fingered by feds analysing the blockchain. That’s police work. Different monitoring mechanism.

The goal is stopping money laundering. But the midpoint, identifying accounts laundering money, and endpoint, seizing those funds, are downstream of the paper’s concerns. To the extent the paper discusses OFAC and similar agencies, it implies an endpoint far more drastic than anything done so far to Tornado or its users.

> the paper is relevant

Tangentially. But not in furtherance of the argument that OFAC sanctions are ineffective.

The beneficiaries of this centralized control are any one who depends on government spending or regulatory restrictions for their job, it's your parents and neighbours, your partner and cousin. This is a massive cohort - who are over-represented in the top 10% of income earners [1] - who participate in the manufacturing of consent for restrictions on our right to engage in mutually voluntary economic interactions with other consenting adults.

[1] https://www.hoover.org/research/california-state-government-...

Something like this going mainstream would require us to completely reform the way the country collects revenue and might even affect our access to debt, so (in their eyes) why not just stomp out the promising ones with whatever justification is easiest?

Have you followed a financial-crimes investigation? Nobody knows where jack is.

The American payment system is essentially decentralized [1]. Each bank maintains its own books and records and periodically compares parts of them with others and a summary with the central bank to promote consistency. The IRS and Treasury don't systematically share records. (Bureaucratic imperatives, after all.) That's why when the FBI or the CIA or whomever want financial records they have to quietly subpoena banks. To assemble records they do not have.

> this going mainstream would require us to completely reform the way the country collects revenue and might even affect our access to debt

Wall Street has enthusiastically embraced crypto. It's cheaper to run, permits higher fee loading and is regulatory greenspace, which tends to favor sharks. Nothing about crypto makes taxes or debt impossible. Taxes were collected and debt raised for the millennia when cash and commodity money reigned. Crypto is easier to track than either of those.

[1] Aside: the difference between crypto and traditional rails isn't decentralization. It's eager evaluation. The blockchain is always current everywhere. Bank records are not. The latter is computationally cheaper, but at the cost of more error. Centralized banking would involve everyone having an account at the Fed. It has been suggested [a].

[a] https://econreview.berkeley.edu/fed-accounts-and-the-right-t...

There is no reporting requirement, but a record-keeping one [1].

[1] https://www.fincen.gov/sites/default/files/shared/bsa_quickr...

The IRS and FinCEN don’t systematically share information. (Ironically, the IRS is more restricted in this respect [1].)

[1] https://www.irs.gov/irm/part4/irm_04-026-008

AML/KYC is not just about terrorism (where it's doubtful if these measures actually have much effect, given how much terrorism is state-sponsored or -backed), it's more about organized crime - and I'd say that yes, organizations like the OG Italian mafia have a way harder time these days. Particularly Italy has made a lot of progress combatting them.

If anything Italy proves how ineffective these laws are. Every couple of months they announce a 100 million euro Ndrangheta/Camorra related seizure and yet these groups still have thousands of members, still traffic drugs by the ton, and still extort half the businesses in the South.

I consider myself entitled to have my Amazon purchases private. Guess what? They are. I don't need a blockchain for that.

There are literally countries where people get sent to jail for giving money to pro-democracy groups or journalists.

If you're an American, imagine a scenario where rights are stripped away from people at the federal level and donating to those causes becomes illegal.

Surveillance has impacts far beyond your consumerist lifestyle.

Imagine if your government banned weed or abortion pills or porn. Or if your country gets taken over by a dictator and you want to fund the opposition

That or you find a plug for your weed (like half of Europe does), abortion pills (like half of the US is about to do) or porn, and you pay with old fashioned cash. I know, not having one click order of your weed is horribly harsh.

Money can be transferred; speech can't be transferred. That's a significant enough difference to them that "why is privacy for one good but privacy for the other bad?" seems like a facile comparison.

Anti-money laundering laws may not prevent organized crime. But organized crime massively benefit from their absence. Solutions don't need to be 100% effective to be useful.

The difference between communications and finance is that finance is integral to the state. Currency and taxes are a core instrument of the state (even its capability for direct physical violence requires finance to maintain and exert). Even so, privacy only applies to SOME forms of communication just as it still applies to SOME forms of finance (though for the latter this is more often de facto than de jure). If you want true communications privacy, you need to build parallel systems that don't interact with public or compromised ones and even then there's the risk of someone taking information from one system to another and leaking it (this is why OPSEC/INFOSEC/COMSEC is such a big deal).

Yes but there should be a cost-benefit analysis. The current system of low reporting thresholds across the board and filing SARs on anything that moves does not produce actionable intelligence 95% of the time. No one is against BSA recordkeeping requirements for instance. I am against a system that treats everyone as guilty until proven innocent (thousands of people have had Paypal or Coinbase decide to freeze their funds indefinitely for "compliance reasons") and incentivizes "derisking" left and right. See https://www.wsj.com/amp/articles/account-closed-how-bank-de-... (or https://archive.ph/D3amw).

UBO laws are a great example of poor cost-benefit analysis. Actual criminals will just get stolen identities or homeless people to put down as owners while the 99.9% of law abiding people have millions of unnecessary added compliance hours every year.

Allowing it to remain open source and accessible as a tool for blockchain privacy and codebase for cryptographic research is a net benefit for the entire world.

A comparison would be that US decides to sanction the open Matrix protocol along with any user, developer, source host, or sponsor that has ever contributed to it in the past - because it can facilitate end-to-end encrypted terrorist communication.

You can deconstruct anything like this: "a gun is merely a set of mechanical parts that can be repurposed for a variety of applications unrelated to shooting things".

Besides, the code or math isn't banned or illegal, the organisation is. Quite different things.

> A comparison would be that US decides to sanction the open Matrix protocol along with any user, developer, source host, or sponsor that has ever contributed to it in the past

That is not what happened so it's not a comparison at all.

Violence and privacy are also different categories. A weapon that can quickly kill dozens or hundreds of people should arguably be regulated differently than a blockchain protocol that enables user privacy.

> the code or math isn't banned or illegal, the organisation is

There is no organization. The protocol is sanctioned - meaning if you fork the code, or build your own implementation, you risk the same fate as the tornado cash developers.

> That is not what happened so it's not a comparison at all.

It is very similar. The US sanctioned the Tornado Cash protocol and anybody who is using or contributing to it.

The government hasn't sanctioned the code of Tornado Cash, only the concrete instance present on a couple wallet addresses.

When I use the public knowledge of a library book on how to create a gun to actually create a gun, I create an instance of a gun - and in all developed countries, I will run into weapons laws and regulations at that point. As for spud guns, these are questionably legal or outright banned in many large nations outside of the US [1].

[1] https://en.wikipedia.org/wiki/Spud_gun_legality

The government has explicitly said that all property and interests in property of Tornado Cash, and anybody found to be supporting it it any way, is blocked. This is why GitHub and all hosting services will refuse to allow it on their platforms.

The code is implicitly sanctioned. Any person who posts the code will probably have their repo removed, and maybe their account flagged or deleted. If you continue to try posting the code to many different hosting services you might be seen as supporting Tornado Cash, and could be facing jail time.

The protocol - the math and rules - is also implicitly sanctioned. If you build a new protocol using similar cryptographic tools, you will probably face similar risks.

> only the concrete instance present on a couple wallet addresses.

If you feel this US will stop at only these addresses, you are very naive. Any individual can fork the protocol, and it will be on a new address. Any individual can also build a competitor to Tornado Cash using similar cryptography, and they will probably also be putting themselves and their project at risk of US sanctions.

> When I use the public knowledge of a library book

However, the information is free - you can find it in a public library, and nobody is attempting to censor it.

There are two separate problems here. One is that the US sanctions are leading to censorship of knowledge and cryptographic research, which is concerning. The other is that the US sanctions are targeting an open source protocol enabling E2EE privacy on the blockchain, not that different than if they were to sanction Matrix protocol.

Which shows the US government still don't understand cryptography, cryptocurrencies, smart contracts, or Open Source.

The Tornado Cash "organisation" is just a bunch of researchers and open source developers, now being sanctioned for having the gaul to write code that is privacy-preserving. The Tornado Cash smart contracts live on on every chain they are deployed to, and the IPFS-hosted UI is untouched.

Amusingly, you can also prove transaction history with Tornado Cash if you want to, for example, to prove to law enforcement or a bank that your funds are legitimate. So these sanctions are only actually going to affect legitimate users who simply wanted on-chain privacy, such as "famous" people with `.ens` domains attached to their addressses.

Absolutely hilarious that cryptobros were the first ones to scream that blockchains allowed for a fully open history and that anyone could see where the funds of their banks were coming from, but the moment they can't hide that they have $200k in cryptocurrencies and that they bought $2000 worth of stuff on analbeadsandcocaine.eth, they cry foul. It's working exactly as designed.

But alas, the code and any research knowledge it provided has been removed to comply with this deeply unethical move by the US.

Despite what you're attempting to lie about, the tornadocash code is not illegal. Feel free to repost it on any host that does not work with the US (or that isn't as trigger happy as github). The Tornado Cash organization has been blacklisted. The cryptography that runs it hasn't been made illegal.

An obvious place to post this code and protocol would be on Ethereum, which is censorship resistant. This is what the original developers of TC have done, and the result is a contract that becomes immutable and accessible, and is now the target of the sanction.

But I will not do that, as that would put me at risk of 30 years of jail time.

I will also not post the code on Gitlab or another service, as the repercussions can be severe. Whether it is just my Gitlab account being deleted, or whether it is more significant like the US government investigating me, I do not want to put myself in that situation.

However since you are the one saying there is no problem at all with it, I wonder if you would like to do that for us?

> Yes, privacy to help hide your coins acquired through dubious means, we know that.

It is sad that you default to assuming criminal behavior. The same argument is being made today by politicians and governments to try to add back doors to E2EE chat protocols and cryptographic signature schemes.

Unfortunately, most of the services I use comply with US law and would therefore be likely to remove the repository immediately. As a second, very unfortunate point, I don't give a shit about reposting a service whose primary purpose is money laundering. Very sorry about that. Maybe researchers could have thought for a second before putting all their efforts on what is widely known as a mixer made for money laundering.

>It is sad that you default to assuming criminal behavior.

My dude. 20% of the transactions going through Tornado Cash were for money laundering. The 80 other percent literally only serve the purpose of hiding the trails. If TC was used 100% for money laundering, everyone would still know that everything coming out is still illegal money. Having "legitimate" transactions going through (whether from privacy conscious users, or people sending legal money though to blur tracks) is a feature of every money laundering service.

Matrix, Tor, PGP, these are all beneficial tools for the world, used by people that are not criminals. These are also widely known as tools used by criminals.

Banning Tor as a whole is stupid, because it's not meant to be only used for that, and is a protocol. However, putting anyone who regularly posts on overthrowthegovernment.onion on a watch list is reasonable (even if they only posted pictures of kittens), as well as is closing the website, as much as possible, since it causes a net harm on society as a whole.

Banning E2EE as a whole is stupid, because it's not meant to be only used for that, and is a protocol. However, raiding the office of the man that hosts the "Bring The 4th Reich" chatroom is reasonable, as well as closing it and keeping a close eye on anyone who participated is also reasonable (even if they only posted pictures of kittens), since it causes a net harm on society as a whole

Banning cryptocurrencies as a whole is stupid, because it's not meant to be only used for that, and is a (bunch of) protocol(s). However, sanctioning the service that is mostly used to launder money (which comes from criminal activities) named tornado.cash is reasonable, as well as keeping an eye on everyone that participated (even if they only wanted to hide their transactions) since it causes a net harm on society as a whole.

Welcome to the real world, where going to the seedy place where at least 1/5th of the people in there are engaging in criminal activities might get you in trouble. Feel free to look for a mixer that does a little bit of research on the source of the funds before taking them in. You are not entitled to privacy if your actions may cause harm or contribute to causing harm on society.

If it was only being used for money laundering, it wouldn't actually be laundering. To launder money you need to mix up your illegal funds with a larger pool of legal funds to give some plausible deniability to whether your funds are legal or not.

Still money laundering, just not with clean money on the other side.

In practical terms it might not matter, the funds would just be frozen. But it is still a form of money laundering that obscures the true source of the funds.

When lack of privacy becomes the default, everybody with a sense of privacy becomes suspicious.

The Tornado Cash organization was not sanctioned, the contract addresses were. The Europeans were not sanctioned, a registered entity was not sanctioned. The code was sanctioned and this is new. The code and all the pooled funds were sanctioned simply because there is no way to distinguish withdrawals from licit or illicit funds and playing on the popular and incorrect perception of deposits being illicit, and this is new.

There are many more similarities to the analogy presented. Analogies compare dissimilar things for the ways they are similar, not the ways they are different.

In this case, the private sector - Github - responded to the sanctions by deleting the accounts of contributors to Tornado Cash github repository.

No one has said you can't distribute the TC source code.

What you can't do is run a money laundering service with it. And the vast majority of TC transactions seem to have been exactly that - ways of hiding crypto from tax offices.

> A comparison would be that US decides to sanction the open Matrix protocol along with any user, developer, source host, or sponsor that has ever contributed to it in the past - because it can facilitate end-to-end encrypted terrorist communication.

A better comparison is the Phantom Secure sting, where a network that was used for primarily criminal purposes was shutdown.

https://www.reuters.com/world/how-an-informant-messaging-app...

The government has explicitly said that all property and interests in property of Tornado Cash, and anybody found to be supporting it it any way, is blocked. This is why GitHub and all hosting services will refuse to allow it on their platforms. If you try to publish TC source code, you could be considered aiding the blocked persons, and face up to 30 years in jail.

If you build a new implementation of the same or similar protocol, you might also be putting yourself at risk.

> And the vast majority of TC transactions seem to have been exactly that - ways of hiding crypto from tax offices.

The vast majority of TC transactions are for privacy. How much of that is evading tax offices or illegal money laundering is less clear. Estimates put it in the 10-20% range[1]. There are many users that would like to use TC but have avoided it because of the lack of regulatory clarity. Had the US government instead come out saying specifically that TC-style privacy on blockchain is a right that all users should be entitled to, the rates of non-criminal activity would probably be much higher than 80-90%.

> A better comparison is the Phantom Secure sting

This is a poor comparison. Phantom Secure was not an open source E2EE protocol like Tornado Cash or Matrix - it was a private company and network led by a single individual who profited immensely by selling devices to known criminals.

If you think TC is comparable to Phantom Secure, then Matrix and Tor should also be comparable to Phantom Secure, but of course that is a bad comparison.

[1] https://twitter.com/bantg/status/1557053714405490691

This is a completely baseless allegation, that seems to rely on nothing more than the assumption that seeking privacy is an indication of criminal intent. It's the kind of logic used to rationalize dragnet surveillance programs that do away with privacy rights.

>>A better comparison is the Phantom Secure sting, where a network that was used for primarily criminal purposes was shutdown.

That's completely incomparable. That was a service to sell bug-proof phones, not the phone itself, and the service was expressly marketed to criminals to avoid police surveillance. The police infiltrated the service and bugged the phones.

The Matrix example, where a generic privacy tool is outright banned, is far more comparable.

So github removed it for no reason?

In the same way that if you ask me to keep a bag and I learn two days later you've been arrested for murder, I'm definitely not keeping that bag, even if the bag itself isn't accused of murder.

If it’s being used in some random commercial transaction, not so much.

While this applies in this instance, it doesn't make it right.

> Federal law prohibits contributions, donations, expenditures(including independent expenditures) and disbursements solicited, directed, received or made directly or indirectly by or from foreign nationals in connection with any federal, state or local election. This prohibition includes advances of personal funds, contributions or donations made to political party committees and organizations, state or local party committees for the purchase or construction of an office building funds under 11 CFR 300.35, and contributions or disbursements to make electioneering communications.

https://www.fec.gov/help-candidates-and-committees/foreign-n...

Equivalent would be to block all withdrawals/deposits for all users at an international bank because they were found to be violating AML laws in some country.

(the supreme court are so closely tied to politicians that their decisions can't really be separated)

OFAC literally means the Office of Foreign Assets Control, it cannot be applied domestically to American assets.

In EVMs, no node is aware of which node saw a transaction first to relay it to miners. Therefore, one argument is that the deployment of the contracts cannot be known to be done in a non-American source. To strengthen an adversarial argument one could move to the account owner that paid for the contract deployment, but I believe there are challenges for that as well since sole custody of a private key cannot be known, only assumed.

This isn't to weasel around any attempt at government control or consequences, only the OFAC designation. It seems like the incorrect authority.

It's not, though. The project got sanctioned and by extension the services it provides. The blockchain implementation of said service is rather unique, but I don't think this is technically any different from projects like Popcorn time being sued/shut down despite their p2p systems.

The difficulty with smart contracts is that it's hard to take those services down. After all, you can't take a smart contract out of ethereum. The legal ramifications of this are interesting: the undeletable nature of blockchains and their capacity to store arbitrary data or execute arbitrary code could taint the entire blockchain when bad actors unleash services that cannot possible be taken down, causing anyone participating in the blockchain system to be an accomplice. Or perhaps the governments of the world will look at this more pragmatically and simply consider the contract dead, only sanctioning new people who call upon the contract to execute transactions.

This indestructibility of the blockchain is often sold as a benefit, a way to stick it to the government, but the real world doesn't care about your technical implementations when the police tells you to shut it down. Designing a system that you cannot control or shut down may not be a great idea, especially if interactions with said system are logged permanently and publicly.

An OFAC sanction is orders of magnitude more serious than Popcorn Time being taken down via DMCA requests and lobbying. I don't think that's a fair comparison.

It is not something that can be done on a whim and can’t happen every time the US adds a new address to their sanctions list.

“It never happened! Except that one time when it was an alpha”

The good thing is that it's become a "hobby" mechanism. Imagine the scenario where you come into £1m in cash by "finding" it. What are you going to do with it? You can't buy a house, you can't put it in the bank, you can't invest it in stock or a pension. You could subsidize your lifestyle a bit - but not vastly due to the risk of someone noticing.

The best idea that I can come up with is to start a cash business and launder the money through that; for example a burger van or something... Probably you could build that to about 100k a year and get away with it, just, maybe. Quite a lot of work and inconvenience to do it. Of course you could try and get it laundered in a criminal conspiracy (a-la breaking bad) but you will just get robbed. Maybe used cars would work as well.

Maybe you could drive round and buy up some nice wine or something like that that keeps for a long time... I think you can pay cash for a couple of hundred without attracting too much attention.

You are on the clock as well - every 5 years or so the notes change and stop being accepted.

The point is that cash works well for the low end informal economy, builders and plumbers and window cleaners can make their businesses work with it. It doesn't work so well for oligarchs. Crypto does. That's just one reason it's so bad and I don't mourn for this.

The state will not give up it's monopoly on money or violence. Anyone who challenges either of these will find the other deployed against them.

(prior to this, there were a few incidents during WW2 where for various reasons vast amounts of value in the form of gold had to be moved around. At considerable risk. https://www.warhistoryonline.com/instant-articles/hms-edinbu... )

Whereas with digital money, one penny and a trillion dollars are equally weightless. Huge transactions that can't be interdicted start to raise problems for the state, as you say.

In what country are you basing this comment on? I haven't heard of any cash notes becoming "outdated" or "expired" after five years in any country I frequent.

> It doesn't work so well for oligarchs

It does work well as long as everyone is inside the gray/black markets, as they won't ask questions where you got your £1m cash from when you buy a property in the dark from them. How do you think most large shipments of drugs are being sold/bought? Trading cash for the drugs, almost exclusively. That's why when the police does busts of large shipments, they often come across large cash stashes as well, if the deal was just made.

A more spectacular example happened in the Northern Bank robbery when a significant fraction of all the bank's notes in circulation were stolen from its vaults; the bank decided to replace them making all the stolen but unlaundered ones worthless.

The US is unusual in not explicitly withdrawing old note series from circulation, despite their lacking modern anti-counterfeiting features.

To a great extent all this AML is because of the "war on drugs" and the extensive use of large amounts of cash in drug dealing. Financial sanctions are a more recent reason.

The thing is that it's become so easy now to pay by card, basically anyone can get a payment terminal the size of an iPhone and all cards are now contactless.

So while I'm against it, I think the govt + banks are successful and we can't provide many counter arguments apart from privacy / libertarian ones that most people dgaf about

>[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes

4th amendment

>The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Basically, when you engage in commerce, your rights to be secure and have privacy in personal matters is diminished because you've entered into a public sphere interacting with others with money.

Law gets to reach in and have influence in how people exchange money and goods, but not into their personal affairs. There are graduated levels of "this is my business" vs. "laws can be made about this behavior" depending on the activity.

If you want to change, it'll be a big uphill battle.

[0] https://www.cato.org/blog/money-laundering-laws-ineffective-...

Nonsense. AML laws are precisely a way to ease police investigations.

It's true that they aren't very effective against the largest criminals. That should be fixed by forcing disclosure of beneficial ownership arrangements but that has turned into a roadblock for investigations now precisely because AML laws mean police investigations can get that far.

For example, police investigations used to be stymied by numbered Swiss bank accounts. Now AML laws mean that is no longer a protection, and now they are stymied by being unable to force disclosure of who is the beneficial owner of "This is not a criminal gang PTY LTD" from the Cayman Islands.

Are there any actual examples of this? Nearly every major jurisdiction, including UAE, BVI, all of EU, have UBO registers now (except America because despite having authority to do so FINCEN can't make a basic CRUD website). UBO in terms of actually stopping crime is useless because there is nothing that prevents people from lying about it. There are lawyers who will find homeless people to serve as straw men in just about every place in the world. If you're involved in drugs or large scale fraud the extra 2 years or whatever from lying on the UBO form doesn't deter you anyways since if you get caught it will run concurrent with the 10 years you got for your actual crime or it will make your plea deal slightly worse.

OFAC's predecessor was established in 1940. OFAC itself was founded in 1950 and expanded in 1977 [2].

[1] https://en.wikipedia.org/wiki/Executive_Order_8389

[2] https://en.wikipedia.org/wiki/International_Emergency_Econom...

You cannot transact in such a way as to break source/destination. It is built into the system. It is an axiom that has been etched into stone, and is fundamental to the way the system works. Tax authorities can't do their thing without it. Law enforcement can't do their thing without it. The Feds can't keep foreign adversaries out of the system without a reasonable amount of compliance with GAAP.

It absolutely blows that apparently professional discretion is dead; and businesses like Plaid/Visa/card providers/payment processors/merchants are passing around transaction data like hot cakes. However, the agreement was made through legislative consensus that auditability, and due process constrained financial record access served the public interest more than it hurt it.

Personally, I think we're too intrusive in financial monitoring right now, especially in reference to the lower end of the income bracket, and way lighter on the higher side than we should be, but it is what it is at this point. I'm just a bit nervous about the abusability of this mechanism at this point.

People who want to see a functioning society and pay their taxes get screwed. The rich and criminals get to do whatever they want.

So, business as usually really, but average person has to take the small wins when they get them.

Personally i think the permanent public record of the blockchain is a good guard rail. If you want to make small transactions anonymously cash is there.

[1] https://techcrunch.com/2022/08/08/treasury-tornado-cash-laun...

For example, if somebody who owns several private businesses, including one that people frown upon but that makes them a lot of money (think producing legal pronography), but have their businesses interact in such a way that to most people it looks like they are making most of their money from real estate investments, that is generally fine as long as they follow applicable tax laws, don't try to bypass the government's anti-money laundering controls, and are not trying to defraud others by saying something like "Look how much money I'm making from real estate investment. Your investment firm should hire me."

But here we had a mixer service where an estimated 20% of funds it hides were criminal in nature. It is not legal to knowingly facilitate criminal money laundering. If viewed as an unincorporated association operating this service (which is how the treasury views this), and with that sort of proportion of its use being criminal, it is implausible that the operators did not know that the service was being widely used for illegal money laundering, not just the legal kind. Because of this, the operators had a duty to modify the service they offer to make it harder to use for illegal money laundering, or to shut the service down entirely.

If you want to run a smart contract based mixing service like this, you pretty much need to design it to only accept funds that someone has verified are not criminal proceeds. Perhaps you as the operator does the verification, or perhaps to avoid centralization you allow for a variety of trusted organizations to verify lawful nature of the source of the funds, with each organization after verifying creating some form of signature for the mixer user to submit along with the funds to avoid the transaction getting rejected.

You don't seem to understand how smart contracts work. You upload the code and it lives on forever. Unless you code a way to shut it down or modify it there is no way to do so.

Tornado cash the app on Ethereum is still alive and well today and will probably be alive and well in 2100.

https is primarily used for legitimate purposes and without it the internet wouldn't function in a secure way. Tornado Cash is at the other end of the spectrum. It barely makes sense to use it for anything that isn't crime. Private messaging sits somewhere in the middle. I think demands to be able to tap communication with a warrant are legitimate.

devs were mostly anonymous, IIRC. Coindesk says “Tornado Cash developer Roman Semenov's GitHub was suspended.” [1]

> What will happen to the tainted money? This figure is about 400M$. I expect a secondary market for TCtETH (Tornado cash tainted ETH)

indeed. the feds haven’t seized any money. the 10,000s of TC users still have anonymized possession of decent sums of money and have effectively been told “you can’t legally use this for goods and services”. have the feds just created a bunch of $1000 coupons for DNMs?

> What happens to the protocols/pools/(d)apps which interacted with it?

contract still live, i assume. i think it was governed by a DAO so if they haven’t/don’t hurry up and lock that down there’s risk of a malicious takeover as the TORN token devalues. if you blacklisted everything that these tokens interact with you'd blacklist like 10% of crypto. AMMs and bridges are in some sense just a much more diffuse tumbling service. i guess it works for now because most people running Ren nodes (for example) don't understand that they're helping people launder, whereas the TC service is much more in-your-face.

Tornado Cash published their UI a month ago. their GitHub’s been taken down but i expect mirrors will surface. it should be totally possible to keep using the service — expect significantly decreased liquidity — and the fun part (for me) will be to sit and watch to what degree the decreased normie use of TC kills the thing v.s. just slows it down.

the GitHub ban is a warning to me though. i’m in (non-crypto) circles where we largely host our own repos, but few of us publicly mirror the software we build upon. makes me think i should start doing so in advance.

[1]: https://www.coindesk.com/policy/2022/08/08/crypto-mixing-ser...

No, they haven’t. When the Russian central bank was sanctioned, everyone who’s done business with them didn’t lose the dollars they were paid. They’re under more scrutiny, when they spend any of their dollars, because they were proximate to a sanctioned entity. But the funds are still theirs.

Most smart contracts are deployed in such a way as to be immutable. They can also be cloned trivially. The source has already been backed up to IPFS.

They might as well ban elliptic curves.

Also, someone already used TC to send 0.1ETH to dozens of celebs such as Jimmy Fallon and Dave Chappelle, because crypto works like email. You can't prevent someone from sending something and you can't prove it was or wasn't them that initiated it.

Just chiming in to make it clear that the protocols that have to do with the core service are not governed by a DAO and are fully immutable. Nobody can change or shutdown those smart contracts without the blockchain itself manipulating things, which is for all intents and purposes impossible.

I am a small fish that develops software products for clients and for my own company. The chances of me being punished by Github are probably close to 0 since I do not do anything even remotely related to money, politics and other "hot and exiting" areas. Still unless explicitly requested by client I always host my own stuff either on my premises or on rented dedicated servers from OVH and Hetzner. The whole idea of someone else controlling my assets drives me up the wall and I am trying to avoid it as much as reasonably possible.

He apparently used it to donate to Ukraine.

The real thing at stake here is freedom of speech. Following this OFAC announcement the code was immediately censored from Github. This is because OFAC violations can land you in jail for up to 30 years. This means that code, which is clearly just speech, is being censored. Either first amendment, free speech rights will be eroded or governments will have to relinquish their control when it comes to who deciding how you can spend your money. Governments clearly aren't going to give up their control without a fight.

Sometimes there's a political and ideological aspect to our work as software engineers. I'm reminded of brave heroes like Martin Hellman and Phil Zimmermann who risked going to prison over our right to access cryptography. The internet as we know it today only exists because they were willing to break the law at immense personal risk.

We need people with that kind of courage more than ever today.

I think sadly, Israel just did ban hard cash for large transaction. See https://news.ycombinator.com/item?id=32281151

And we have to use it (for some unstated reason).

So the only solution must be to enable money laundering so people can get their privacy back.

My take: that seems kind of backwards. How about we just don’t use the thing that purposely exposes everyone data? If people want privacy then that seems like a design flaw.

Enabling (maybe limited) money laundering is not a good solution. It’s a very odd band-aid on the real problem.

This is a false dilemma. We have more choices than “enable money laundering” and “no one has privacy”.

I think these are analogous issues, and we have seen several times that if there is a backdoor, you can not keep it so only the "good guys" have the key. So this is a true dilemma, you can either have strong encryption or backdoored encryption.

I believe the financial privacy vs money laundering is also a true dilemma. If you have privacy, money laundering is trivial. If you can not money launder, you do not have privacy.

Additionally, just because you trust the financial institutions you deal with does not mean you have privacy.

You have more privacy than you would on a public ledger, but some people have privileged access and can see all your financial information.

This lack of transaction privacy does enable censorship[1].

However, I think most people are willing to exchange their privacy for anti-money laundering.

[1] https://www.eff.org/deeplinks/2017/03/payment-processors-are...

However, few if any people are ok with making their entire purchase history public - which is what BTC does, unless you use something like TornadoCash.

Basically, the problem of having privacy + AML is easily solved with a trusted 3rd party that can check transactions while still keeping them private from most others. Crypto's insistence on avoiding trust is self-defeating, as always.

Which other choice is there? AML as-implemented is literally a policy that says you can't have digital transactional privacy, which is the only reason privacy technologies violate it when no other lawbreaking occurs.

And it has <= 0.2% effectiveness and high compliance costs.

https://www.tandfonline.com/doi/full/10.1080/25741292.2020.1...

It's a total failure and it's inexplicable that anyone who understands it would defend it.

https://www.theguardian.com/world/2020/sep/05/making-a-slow-...

The meat of Japan's policy is AML/KYC and very actively cutting businesses off from financing if they have ties to the yakuza.

Actual results show that the paper you're referencing is simply incorrect. The paper focuses heavily on how much of the funds are recovered, and how much money is being moved undetected, but doesn't seem to consider how much more would move without enforcement.

My #1 concern is privacy from other people in my banking transactions. You know those Twitter accounts that post everywhere celebrities fly? No one should be able to do that for what I buy. Bitcoin gives anyone that information by design. I don’t like that.

But again, I think the article’s solution is attacking the wrong problem.

Why are you fine with it if it has significant costs and doesn't even work?

> My #1 concern is privacy from other people in my banking transactions.

This is everybody's concern, some people just realize that "other people" include authoritarian governments, corrupt law enforcement and anyone who can hack your financial institution and then post everything they're required by law to collect on the internet.

> Bitcoin gives anyone that information by design.

Monero doesn't.

And these people are concerned about the wrong things, in general. You can't live a good life under an authoritarian government, under corrupt law enforcement, or with a bank that is easily hacked into.

The solution is not to try to distance yourself from these things through magical technology and then be amazed that the authoritarian government or corrupt law enforcement attack you for even using that technology. The solution is to fix the government, law enforcement, and financial institution technical security. All very hard things to do, to be clear, but they actually work, and fix many other problems. Using TC works until it doesn't.

See that was kind of my original point. Why do problematic things to paper over Bitcoin problems if they’re not issues elsewhere. Why not just use Monero instead?

In no other industry would you find for example, "we made a better hammer, but when you use it to drive nails as a minor side effect, it may/may not fund the abuse of children and development of nuclear weapons by rogue states"

If you truly believe in privacy, it's okay to simply say the technology is fundamentally broken by design and seek a better alternative.

You might as well say that any technology should be thrown out if somewhere, somehow, hypothetical bad guys could use it.

Build a better hammer that is great at hitting nails, but can't be used to bash someone's skull in.

You can have excellent privacy while not permitting money laundering if you have good, trustworthy banks that properly enforce AML while not cooperating with law enforcement unnecessarily.

This is a problem for Bitcoin as well. What if someone got ETH from Tornado. Then converted the ETH to renBTC (https://renproject.io/) on Uniswap. Then converted the renBTC to BTC. Are those Bitcoins now somehow tainted?

This new law makes crypto essentially unusable (at least for US persons).

There are APIs for companies that do this taint tracking for you, eg: https://bitquery.io/products/coinpath, https://www.chainalysis.com/chainalysis-kyt/, etc

Possibly. It depends on who the recipient is. Coinbase may not want the coins but others will not care.

1) The sanctions only apply to U.S. persons.

2) My understanding is that it's fine to accept "tainted" ETH as long as it doesn't directly come from one of the Tornado Cash contract addresses[0].

[0] https://home.treasury.gov/policy-issues/financial-sanctions/...

Are you sure? That's usually not how US sanctions work - they claim extraordinary jurisdiction. E.g. BNP Paribas were fined for transacting with Iran even though they're a French bank and France has not sanctioned Iran (to that extent).

[0] https://home.treasury.gov/policy-issues/financial-sanctions/...

[1] https://news.ycombinator.com/item?id=32054821

[2] https://www.justice.gov/opa/pr/bnp-paribas-sentenced-conspir...

You linked to [1]. Better links might be [2][3]. Broadly speaking, if you're an SDN (a) U.S. persons are prohibited from doing business with you and (b) your assets under U.S. jurisdiction are subject to seizure.

That second bit is the problematic one. Because due to secondary sanctions, even a non-U.S. person interacting with an SDN can be subject to asset seizure. So in practice, anyone who has a U.S. nexus will stop doing business with you. (Or the U.S. can take their stuff. Also, everyone who doesn't want the U.S. to take their stuff will stop doing business with them.)

[1] https://home.treasury.gov/policy-issues/financial-sanctions/...

[2] https://home.treasury.gov/policy-issues/financial-sanctions/...

[3] https://en.wikipedia.org/wiki/Office_of_Foreign_Assets_Contr...

Sad state of affairs

>Imagine you sign up with your email on a random website and they suddenly now have access to your entire bank statement. Higher medical insurance premiums because they know that you transacted often in an online pharmacy. Expensive delivery charges because they know you can afford it.

Isn't this a major issue with Ethereum-SSO whether or not Tornado Cash is sanctioned? If you need to use a mixer to avoid any site you sign into gauging your net worth, isn't it kind of broken by default?

Sometimes I manage to forget how depressing the healthcare system in the USA is, but am always jarringly reminded in the most unexpected of places

This is why crypto was never fungible or useful for privacy purposes. Gold and other precious medals can be melted. Crypto can never be seamlessly mixed. No matter how hard you try, transactions and trails can be reconstructed. The only way to mix is to generate a huge amount of noise.

This was inevitable. For the past 2 years or so years hackers would process their loot with Tornado. There is no way the govt. would stand for this. It's similar to how the Wanna Cry hack , in 2017, made KYC much more common because the hackers used exchanges to convert stolen BTC into monero. All it takes is a handful of people to abuse a service for it to be tainted/ruined for everyone else.

Except the opposite is true. Tornado cash protocol is working well enough in its privacy features that the US government feels the need to threaten any business touching it directly or indirectly.

Imagine you made this argument for E2EE. The US government can sanction and ban the use of Matrix and all other E2EE chat protocols making it very difficult for users to engage with them - but this does not mean the cryptographic protocols are failing to provide privacy and security.

The non-blinded nature of some blockchains has always been a theoretical risk to the fungibility of their cryptocurrencies, and there have been isolated cases of blacklisting. Today that threat has suddenly materialized in a very significant way. Very likely that will create pressure toward cryptocurrencies with strong anonymity.

Yes, you can. Particularly with zero knowledge proofs and zero knowledge rollups.

As you say: You absolutely CAN seamlessly mix crypto, but it will show a point in it's history where it says "this is where the crypto was seamlessly mixed"

https://www.wired.com/story/bitcoin-seizure-record-doj-crypt...

That simply isn’t true.

> "The only way to mix is to generate a huge amount of noise"

These are directly contradictory statements...

Monero?

How do you cash out anonymously then?

It's funny how digital asset enthusiasts always conflate money laundering and private exchange of cash.

There are fixed legal limits of cash transfers. When crossing borders you literally have to declare cash exceeding certain amounts. In the US the police can even confiscate suspicious amounts of cash.

When they talk about private cash transactions as an equivalent of crypto money laundering, they pretend they're talking about putting a $20 bill in a Birthday gift card, buying a copy of Sports Illustrated at the bodega or tipping the neighbor's kid for mowing your lawn. These aren't scenarios where cryptocurrencies are currently useful and as long as cryptocurrencies behave more like a speculative asset (which doesn't seem to change any time soon) these will still be better served by cash.

What cryptocurrencies instead currently supplant are transactions that would otherwise be handled by bank transfers, credit card payments or online payment processors who have to follow very strict auditing requirements to explicitly prevent money laundering. If you provide a slower, more expensive, less widely used option whose main advantage is "privacy from government surveillance", it will attract exactly the kind of transactions that people don't want to do on systems designed to prevent money laundering. In other words: money laundering.

If you want digital cash that's hard to trace, scammers have long since found a tool for that: gift cards.

i know hackernews doesn't like crypto, but come on maybe question why we are fine with this government overreach? maybe question is this a trend we want to support as "hackers"? could we consider the fact that all governments in the world have a history of abusing surveillance to harm their citizens? you know not long ago i could be locked up for being gay, maybe standing up for cryptography is a good thing to do?

but oh no bitcoin is icky good job government protec me from the bad ideas.

I agree it's weird to remember the past when the opposite was true

i get your point but i don't know if it's true. on various occasions, i've wanted to (1) anonymize my funds before sending them to a discreet cause and (2) generate return on the funds i hold long term. for (1) i specifically avoid TC because going through a tumbler points a huge target of "this is suspicious activity", thereby drawing more attention to me specifically (attention isn't good for privacy). for (2) TC became an appealing place to park ETH particularly after ETH-denominated yields plummeted during this last DeFi crash (TC pays fees to the mixing pool). do we know how much of that "90% of non-hacked funds" involved in TC were provided by privacy advocates v.s. good ol' capitalists seeking returns from laundering?

This is a GIGANTIC claim that you're going to have to evidence. Alexey Pertsev, Roman Semenov, and Roman Storm all studied STEM subjects at university, spent years working as pentesters, QAs, SWEs etc, as some sort of long-con to create a money laundering platform? What a totally absurd thing to say, and is quite frankly insulting to the entirety of this site.

--edited for spelling --

Scrutinise?