Ameen Soleimani, who was an early contributor to Tornado Cash, has created a fork that aims to be a better version of the blacklisted Ethereum coin mixer. The U.S. Treasury Department sanctioned Tornado Cash in August last year because they said criminals—mainly North Korean state-sponsored hackers, Lazarus Group—were using it to launder dirty cash. Soleimani and another developer have created a fork of Tornado Cash called Privacy Pools that works by allowing users to publicly show that their withdrawals are not linked to bad actors.
Users can still make anonymous transactions, but there is an option to make it clear that the money being moved is not from something criminal. The new app works just like Tornado Cash, but when users click the option to withdraw funds, they can generate a zero-knowledge proof, which publicly shows they are not using a criminal blockchain address, without revealing who they are.
Coin mixers—which are used for a number of reasons—are just one of the things U.S. authorities are now paying attention to since launching a tough crackdown on the crypto world. A number of U.S. lawmakers claim the fast-moving industry’s coins, tokens, and apps are favored by criminals, and most politicians—even those who like crypto—are at the very least calling for clearer regulatory guidelines.
Tornado Cash blacklisting
The blacklisting of Tornado Cash by the U.S. Treasury Department has not only affected the team of developers behind it but also its users. Tornado Cash was a tool that allowed Ethereum users to mix their coins and preserve their privacy. However, its usage by bad actors prompted the authorities to take action. Tornado Cash’s main developer, Alexey Pertsev, was arrested, and the app was blacklisted, preventing Americans from using it.
Ameen Soleimani, an early contributor to Tornado, has created a fork called Privacy Pools that is designed to pick up where Tornado Cash left off, but in a way that regulators and law enforcement will leave it alone. Privacy Pools works similarly to Tornado Cash, but with an additional feature that allows users to show publicly that their withdrawals are not linked to bad actors. This is achieved by using zero-knowledge proofs, which allow users to prove that they are not using a criminal blockchain address, without revealing who they are.
Soleimani hopes that Privacy Pools will be seen as a better version of Tornado Cash and will not be blacklisted by the authorities. However, he acknowledges that there is no guarantee that they will not sanction it. “We live in a regulatory-by-enforcement regime,” he said. He hopes that Privacy Pools will start a conversation and will be seen as a tool that helps regulators accomplish their goals.
The use of coin mixers, like Tornado Cash and Privacy Pools, has become increasingly popular among crypto users who want to preserve their privacy. However, their usage by bad actors has raised concerns among regulators and law enforcement agencies. Coin mixers can be used to launder money, evade taxes, and finance illicit activities.
The U.S. authorities have been paying attention to the crypto world since launching a tough crackdown on it. A number of U.S. lawmakers claim that the fast-moving industry’s coins, tokens, and apps are favored by criminals, and most politicians—even those who like crypto—are at the very least calling for clearer regulatory guidelines. Regulators around the world are struggling to keep up with the fast-moving industry, and many in the digital asset space are hoping that with regulation, they can still build and use tools that will protect their privacy.
The blacklisting of Tornado Cash by the U.S. authorities has highlighted the challenges facing the crypto industry. On the one hand, the industry is driven by a desire for privacy and decentralization, but on the other hand, it is subject to regulation and scrutiny from governments and financial institutions.
One of the key challenges facing the crypto industry is finding a balance between privacy and transparency. While privacy is one of the fundamental principles of cryptocurrencies, it can also facilitate illegal activities such as money laundering, terrorist financing, and tax evasion. Governments and financial institutions are therefore concerned about the potential misuse of cryptocurrencies and have been pushing for greater regulation and oversight.
Another challenge is the lack of clarity around regulatory frameworks. Different countries have different approaches to regulating cryptocurrencies, and some are more supportive of the industry than others. This can create uncertainty for businesses operating in the sector and make it difficult for them to comply with regulations.
The crypto industry also faces technical challenges. The technology underpinning cryptocurrencies is complex and constantly evolving, and there are ongoing concerns about security and scalability. In addition, the lack of interoperability between different blockchains can create inefficiencies and limit the potential of the technology.
Overall, the blacklisting of Tornado Cash highlights the need for the crypto industry to address these challenges and find ways to work with governments and financial institutions to build a more transparent and secure ecosystem. This may require a greater focus on compliance and regulation, as well as ongoing investment in research and development to address technical issues.