Sanctions against Tornado Cash: a Legal Perspective

In this episode, Anna explores the topic of the recent OFAC sanctions against Tornado Cash with 2 interviews: One is with TuongVy Le, Head of Regulatory and Policy at Bain Capital Crypto, who previously worked at the SEC and the other is with Michael Mosier, General Council at Espresso Systems, who used to work at the Treasury, within FinCen and at OFAC itself.

For some context: On August 8th 2022, OFAC, a US government department issued sanctions against Tornado Cash, a privacy protocol that uses zero knowledge proofs to provide on-chain privacy. It was the first time that OFAC had sanctioned a set of smart contracts and a decentralized entity for which there's no clear ownership. This is an event which has had a ripple effect throughout the zk ecosystem and will be the topic explored in a series with different members of the community.

In these two initial interviews, Anna explores what actually happened legally, what a sanction is, what kind of a tool is this, why it may have been issued and what problem arose from the way it was issued and how this might impact future understanding of zero knowledge tech through a legal lens.

_NOTE: Since our recording OFAC has released an FAQ to clarify some of the legal questions raised in our interviews: https://home.treasury.gov/taxonomy/term/1546 _

Here are some additional links for this episode:

• Episode 111: Mixers with Tornado.cash
• Episode 166: Coin Center’s Peter Van Valkenburgh on regulation
• Episode 191: ZKPs & the Dichotomy of Privacy vs Transparency with Josh & Jill
• Chainanalysis: Crypto Mixer Usage Reaches All-time Highs in 2022, With Nation State Actors and Cybercriminals Contributing Significant Volume
• Circle and Coinbase Restrict Movement of USDC Funds From Tornado Cash Addresses Following Sanctions
• Rep. Emmer demands an explanation of OFAC’s Tornado Cash sanction from Sec. Yellen
• What is OFAC?
• OFAC Press Release on Tornado Cash
• OFAC Identifies Associated Digital Currency Addresses for the First Time
• Treasury Sanctions Russia-Based Hydra
• Blender.io Sanctions
• The Bank Secrecy Act
• 311 Patriot Act
• FinCEN: Financial Crimes Enforcement Network
• Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies

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