There are growing concerns that the US government’s recent sanctions against Tornado Cash will become a “slippery slope” for Web3 privacy that could ultimately render the entire space “pointless”.
Speaking to Cointelegraph, Shumo Chu, co-founder of the privacy protocol Manta Network, expressed concern that the strict sanctions against Tornado Cash could have a knock-on effect on any Web3 protocol, including the one that provides privacy.
Chu is one of the co-founders of the Polkadot-based Manta Network, a layer-1 privacy protocol that enables private transactions in decentralized finance (DeFi).
Tornado Cash (TORN) is an Ethereum (ETH) privacy protocol that anonymizes coin transactions. These protocols are similar to Monero (XMR) and Zcash (ZEC) which mask sender and receiver details of crypto transactions.
Earlier this month, the US Treasury Department effectively banned US residents from using the protocol and placed 44 ETH and USD Coin (USDC) addresses associated with it on the list of Specially Designated Nationals on August 5.
Chu expressed concern that other privacy protocols like his could end up in the same crosshairs, adding more censorship to the point of “essentially rendering the entire Web3 space pointless.”
Chu acknowledged that the US government’s ban was ostensibly done in the interest of national security, as the North Korean hacker group is known to use Lazarus Tornado to launder the stolen money.
But by banning the protocol, Chu questioned regulators’ understanding of how decentralized systems based on open source code can be located and used anywhere.
“It’s very possible that regulators just don’t understand distributed blockchain technology and how open source code can be everywhere. [They] may have thought that Tornado Cash developers deliberately helped North Korean hackers.
Last week, the Dutch police arrested a Tornado Cash developer they suspect is involved in money laundering.
Chu added that there have been cases in the past where cryptography developers have been arrested, such as Ethereum developer Virgil Griffiths, but that banning a protocol is “a new paradigm” indicating that the government is trying to code and math itself. to master.
“They ban protocol instead of some people. Essentially, this is a piece of code from the Ethereum blockchain.”
However, Chu believes that privacy protocol developers ultimately prevail. He said that since privacy developers are scattered across many jurisdictions beyond the reach of the US government, he noted:
“If the US tries to take draconian measures against privacy developers, it won’t be so good for them.”
As a developer of privacy protocols, Chu notes that there is a story that privacy is only for bad actors, arguing that “normal people use it too.”
Related: Tornado Cash Shows DeFi Can’t Escape Regulation
He added that there should also be a push to promote good use cases because, as he said, “the nature of the system is not allowed, so there will be people playing the system.”
His views echo those of Kraken CEO Jesse Powell who told Bloomberg TV on Aug. 16 that the sanctions against Tornado were “unconstitutional” and that “people have a right to financial privacy.”
In Chu’s view, barriers to access privacy protocols should be low so that normal people can use them every day. However, his ideal could be threatened by further sanctions from privacy protocols.