Experts commented on the blocking of Tornado Cash

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On August 8, the US Department of the Treasury added the Tornado Cash service, which specializes in improving the confidentiality of transactions, and the crypto wallet addresses associated with it to the sanctions list. The American authorities justified their decision by the fact that the platform was used to launder illegal crypto assets.

Following the imposition of sanctions against Tornado Cash, Circle, the issuer of the USDC stablecoin, blocked the addresses associated with the cryptomixer, and infrastructure platforms Infura and Alchemy began to stop remote requests (RPC) incoming to it. The Infura APIs are used by most applications in the Ethereum ecosystem. Thus, if the protocol is cut off from Infura and Alchemy, it is isolated from a large portion of ETH users.

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Community response to these actions has been mixed. Adherents of the main principle of cryptocurrencies – decentralization – believe that such decisions by centralized services undermine the foundations of the crypto space.

ShapeShift CEO and Founder Eric Voorhees has urged the MakerDAO community to immediately move funds from USDC to another stable cryptocurrency that is more resistant to censorship.

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Experts shared with RBC-Crypto different opinions on how the situation with the blocking of Tornado Cash addresses by the stablecoin issuer will affect the cryptocurrency community.

Useful Solution

Eric Voorhees’ appeal is rather a very careless comment, says exmo.com development director Maria Stankevich. According to her, recommending withdrawing money from a stablecoin that blocks the addresses of an illegal cryptomixer is a very dangerous step. The laundering of illegal crypto assets is one of the most criticized aspects of the industry, so such blocking is important and useful for the market, the expert is sure.

She explained that it is of great importance for cryptocurrency owners to be sure that the cryptocurrency is clean, which means that it is important to use services that will block dangerous transactions in advance.

The expert added that USDC is a very popular stablecoin in the US, which has become actively bought up by users against the background of the fact that the backing of USDT, another major cryptocurrency pegged to the US dollar, is not so transparent. According to Stankevich, blocking Tornado Cash will not affect USDC itself or other stablecoins in any way.

“I repeatedly repeat that the anonymity of cryptocurrencies ends exactly where the bridge to fiat currencies begins. Therefore, exchanges that have not introduced mandatory user verification, do not verify transactions and treat mixers well, are walking on very thin ice: it is simply unsafe to store funds and trade on such exchanges, ”Stankevich is sure.

negative effect

It is quite possible that after such recommendations, a mass exodus of investors from USDC to the same bitcoin or Ethereum will begin, Artem Deev, head of the analytical department at AMarkets, did not agree. American regulators have clearly made it clear to the crypto community that they intend to begin to strictly regulate the cryptocurrency market in the near future, the analyst explained.

According to him, this will have a negative effect on the crypto market, the mass investor will not make the most informed decisions. After the flight of private investors, the collapse may take the form of a funnel, the expert suggested.

“Fiat, gold, futures for raw materials, including agricultural, are assets that investors can also start to leave. Simply because, amid uncertainty, many will want to have something more real in their hands than cryptocurrencies, ”says Deev.

Dependence on the center

Circle will comply with all orders put forward by the US authorities, says Aaron Chomsky, head of the investment department at ICB Fund. He said that the main clients of this platform are large institutional investors who prioritize compliance with regulatory requirements.

According to the expert, the issue of compliance with sanctions is relevant for all issuers of centralized stablecoins, including Tether (USDT), which has a controversial reputation and is popular among retail traders. Both Circle (USDC) and Tether have previously blocked stablecoins at the request of regulators, Chomsky said.

The expert noted that the Tornado Cash case should be viewed in the context of an attack on user privacy. This will complicate the work of crypto platforms, which will have to tighten compliance requirements for processing transactions related to mixing services, the specialist added.

According to Chomsky, there are likely to be difficulties for users who want to increase the privacy of their digital investments. The Tornado Cash smart contract is still available, although blocking Infura and Alchemy remote procedure call (RPC) requests, along with blocking the service interface, will create some, but not critical, difficulties for those who would like to continue using it, the expert explained. He drew attention to the fact that this also applies to attackers, however, the decline in the popularity of the service, if this happens, will facilitate the work of analytical services.

“The inclusion of Tornado Cash on the sanctions list could spur the development of privacy-enhanced products. It actualized the high dependence of the network of the second cryptocurrency in terms of capitalization on centralized services, which is contrary to the spirit of digital assets,” Chomsky believes.

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Source: Cryptocurrency

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