There are increasing alarms that recent United States government approvals against Tornado Cash will become a “slippery slope” for Web3 privacy that could ultimately make the entire space “meaningless.” The ban of Tornado Cash in the U.S. could have effects across Web3 protocols, particularly ones that offer privacy on the blockchain.
Shumo Chu, co-founder of privacy protocol Polkadot-based Manta Network expressed worry while speaking to Cointelegraph, that the strict sanctions against Tornado Cash could have a knock-on effect on every Web3 protocol including ones providing privacy.
Tornado Cash (TORN) is an Ethereum (ETH) privacy protocol that anonymizes coin transactions. These protocols are similar to Monero (XMR) and Zcash (ZEC) which masks sender and receiver data of crypto transactions.
Earlier this month, the U.S. Treasury Department effectively barred US residents from using the protocol and placed 44 ETH and USD Coin (USDC) addresses related to it on the list of Specially Designated Nationals on Aug. 5.
Chu expressed his concern that other privacy protocols like his could conclude in the same crosshairs, which would add more censorship to the point it would “essentially make the entire Web3 space meaningless.” He accepted that the U.S. government ban was done allegedly in the interest of national security. He named the North Korean hacker group Lazarus which has been known to use Tornado to launder the funds it snips.
Last week, Dutch police arrested a Tornado Cash Developer they suspect is involved in money laundering.
Chu claimed that there have been instances in the past where cryptography developers have been arrested, but that banning a protocol is “a new paradigm” signaling the government is endeavoring to put a reign on code and mathematics itself.
“They are banning the protocol instead of some people. Essentially this is a piece of code from the Ethereum blockchain.”
Chu believes that privacy protocol developers finally have the upper hand. He said that since privacy developers are circulated around many jurisdictions outside of the U.S. government’s reach, noting:
“If the US tries to implement draconian measures over privacy devs, it won’t go very well for them.”
As a privacy protocol developer himself, Chu notes there is a description being set that privacy is only for bad actors, disagreeing that “normal people use it too.”
He opinionated to promote good use cases as well because, as he said, “the nature of the system is permissionless, so there will be people gaming the system.”
Kraken CEO Jesse Powell supports him saying that the sanctions against Tornado were “unconstitutional” and that “people have a right to financial privacy.”
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