At a glance.
- Tornado Cash case demonstrates the difficulties of curbing illicit digital currency transactions.
- Prosecutions in digital money laundering.
- California lawmakers halt bill aimed at defending children on social media.
Tornado Cash case demonstrates the difficulties of curbing illicit digital currency transactions.
Regulating the brave new world of cryptocurrency is at the forefront of lawmakers’ minds, but the fact that transactions on cryptocurrency platforms are supported by code, rather than real people, makes it a difficult beast to contain. The Wall Street Journal examines the case of Tornado Cash, a crypto “mixer” (so-called because it obscures the origin of the funds by blending inputs from different users and redistributing them) that the US Treasury Department has accused of laundering billions of dollars in digital currency. In an effort to slow down Tornado Cash’s growth, the Treasury blacklisted the exchange, blocking all property held by the Tornado Cash under US jurisdiction and prohibiting US companies and individuals from conducting transactions on the platform. “It is likely that nearly all responsible registered Virtual Asset Service Providers also took steps to block customers from transacting with these addresses, or face charges of willfully avoiding US sanctions compliance obligations,” tweeted Jeremy Allaire, Chief Executive at Circle, a stablecoin issuer that has already blocked the sanctioned wallet addresses. However, users almost immediately found ways to circumvent the sanctions by transferring funds out of cryptocurrency wallets on the platform and reproducing and relaunching the code on other sites. Tom Robinson, co-founder of risk-management company Elliptic Enterprises Ltd, summed it up, “It is difficult, if not impossible, to shut down Tornado Cash entirely.”
Prosecutions in digital money laundering.
Speaking of Tornado Cash, the identity of the software developer arrested last week by the Dutch Fiscal Information and Investigation Service (FIOD) for his alleged involvement with the crypto mixing service has been verified, as Ksenia Malik told the Block that the man is her husband, Alexey Pertsev. The FIOD stated that Tornado Cash’s alleged money laundering “included funds stolen through hacks by a group believed to be associated with North Korea. Investigations showed that at least one billion dollars' worth of cryptocurrencies of criminal origin passed through the mixer. It is suspected that persons behind this organisation have made large-scale profits from these transactions." Malik insists her husband did nothing illegal, and several crypto industry executives agree. Adam Cochran, a partner at Cinneamhain Ventures stated, “They put a man in jail because bad people used his open source code. This cannot stand in any free society,” The arrest came just two days after the US government sanctioned the platform.
Meanwhile in India, TechCrunch reports that India’s anti-money laundering agency has frozen assets worth $46.4 million from Flipvolt Technologies, the India-registered entity of Singapore-based crypto lender Vauld, for facilitating “crime-derived” funds from predatory lending firms. The Enforcement Directorate declared Friday that Flipvolt was used to deposit 3.7 billion Indian rupees by twenty-three entities into wallets controlled by Yellow Tune Technologies, and that Flipvolt MAINTAINS “very lax KYC norms, no EDD mechanism, no check on the source of funds of the depositors, no mechanism of raising STRs, etc,” allowing the accused firms to conduct illicit transactions on the platform.
California lawmakers halt bill aimed at defending children on social media.
A measure intended to protect minors on social media was shut down by lawmakers in the US state of California last week, the Wall Street Journal reports. The bill would have given California attorneys the power to hold the parent companies of platforms like Instagram, Facebook, Snapchat, and TikTok liable for features known to promote addiction among children. However, the measure’s progress was halted in the state senate’s appropriations committee after social media companies warned it could lead to hundreds of millions of dollars in liability and force many platforms to completely block minors from their services. Meta (parent company of Facebook and Instagram), Twitter, and Snap had all individually lobbied against the passage of the bill, and a number of internet-privacy groups also opposed the measure, fearing it could impede freedom of speech. Executive director for California and the Southwest at tech-industry group Technet Dylan Hoffman stated, “We’re glad to see that this bill won’t move forward in its current form. If it had, companies would have been punished for simply having a platform that kids can access.”