Understanding the Tornado Cash Indictment: Implications and Controversies


The crypto community has recently been abuzz with debates surrounding the indictment of Tornado Cash developers. While some see this as a necessary regulatory step, others, like Coin Center, challenge its validity. Let’s unpack the events and their broader implications.

The Tornado Cash Indictment and its Controversies 

On August 23, the U.S. Office of Foreign Asset Control (OFAC) indicted Roman Storm and Roman Semenov. These developers faced charges of operating an unlicensed money-transmitting business, sparking debates in the crypto sector.

Coin Center’s research director, Peter Van Valkenburgh, quickly challenged the indictment’s claims. He stressed that Tornado Cash merely offers software for money transmission, not the actual transmission service.

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The crux of Valkenburgh’s argument is based on guidance from the United States Financial Crimes Enforcement Network (FinCEN). According to FinCEN’s interpretation of the U.S. Bank Secrecy Act:

  • An anonymizing software provider isn’t a money transmitter.
  • Only those who use the software for anonymizing transactions can be deemed money transmitters.

By this definition, the indictment’s claims seem misaligned. Valkenburgh posits that providing money transmission tools doesn’t necessarily label one as a money transmitter.

Debates Over Smart Contract Control 

One of the indictment’s more contentious points is the control Storm and Semenov allegedly had over Tornado Cash’s smart contracts. Valkenburgh countered this, emphasizing that Ethereum smart contracts’ control levels vary. The degree of control determines whether one is indeed involved in money transmission.

It isn’t the first time Tornado Cash has faced legal challenges. Coin Center contested the U.S. Treasury’s actions against Tornado Cash in October, labeling them unprecedented and unlawful. The enforcement agency retorted that developers should have registered with FinCEN.

Additionally, other Tornado Cash members faced repercussions. Alexey Pertsev, a co-founder, was detained in the Netherlands in August 2022, though later released.

What Comes Next?

Considering these events, Valkenburgh fears for the future. He believes that the Tornado Cash case might influence the legal rights of U.S. citizens to develop and disseminate software.

The Tornado Cash indictment has broader implications than just the fate of two developers. It raises questions about software development rights, the true nature of money transmission, and the evolving relationship between crypto and legal systems. As the saga continues, it promises to shape the industry’s future dynamics.

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