Tornado Cash vs. U.S. Treasury – Coinbase’s CLO provides clarity! Here’s what you need to know!
Tornado Cash, an open-source privacy tool used by many cryptocurrency owners, has fallen foul of Treasury sanctions. The plaintiffs are now challenging these sanctions, arguing they’re being applied incorrectly. Paul Grewal, Chief Legal Officer of Coinbase, has provided some clarity on the ongoing legal tussle between Tornado Cash and the U.S. Treasury in his Twitter thread.
In their legal challenge to sanctions imposed by the US Treasury against Tornado Cash, the plaintiffs have filed their reply brief seeking to lift these designations. It’s worth a read. 1/7 https://t.co/T07QCzQ9Ru
— paulgrewal.eth (@iampaulgrewal) May 24, 2023
All the four arguments outlined by Grewal essentially point towards one central issue: the government’s attempt to apply a property sanctions statute to open-source software, which, according to the plaintiffs, is a misuse of the law. Is it feasible or even valid to apply traditional property law to a decentralized, blockchain-based system?
Fourfold arguments against sanctions
“The plaintiffs make 4 points here, but they all come down to the same problem. The Govt. is trying to ban the use of open-source software using a property sanctions statute. Because this isn’t what the law was meant to do, they can’t make the law fit this case.” Paul Grewal
The challenge to these sanctions centers on four key points. Firstly, they argue that owning Tornado Cash’s digital token (TORN) doesn’t necessarily make one a member of the entity “Tornado Cash.” In other words, just because you own the token, doesn’t mean you’re part of the organization.
Secondly, the challenge questions whether these open-source, immutable smart contracts are “property” in the legal sense. Traditional law says property is something that can be owned, controlled, or changed – but these smart contracts can’t be.
Thirdly, the plaintiffs assert that neither the founders, developers, nor TORN token holders have a ‘property interest’ in these smart contracts. It’s like saying you can use a public park, but you can’t claim to own it.
Finally, they argue that by sanctioning Tornado Cash, the government is essentially impinging on free speech rights. Users of Tornado Cash use the software to protect their privacy while making important donations – actions that are protected by the First Amendment.
Also, read – TORN Token Surges 10% Amid Attack Reversal Proposal
Cryptocurrency needs basic legal requirements
Grewal also clarified that the plaintiffs are not demanding special rules for cryptocurrency, as suggested by the government. They are only seeking that the government meets the basic legal prerequisites that Congress outlined before restricting access to a privacy tool that protects legal purchases and donations.
This legal battle raises some thought-provoking questions. Should traditional property law apply to open-source digital assets? Can ownership be defined in the world of decentralized technology? And does protecting digital privacy fall under the First Amendment? Only time will reveal the answers!
U.S. Treasury Targets Trio Of North Koreans Linked To Lazarus Group Crypto Attacks
The U.S. Treasury Department is ramping up its efforts to combat cybercrime, specifically targeting three North Koreans allegedly involved in supporting the notorious Lazarus Group, known for its high-profile cyberattacks and cryptocurrency-related thefts. On Monday, the U.S. Treasury’s Office of Foreign Assets Control announced sanctions against three individuals allegedly linked to North Korea’s infamous Lazarus Group.
The Treasury’s Targeted Sanctions
The U.S. Treasury’s Office of Foreign Assets Control revealed on Monday that it has imposed sanctions on three individuals believed to have connections with North Korea’s notorious Lazarus Group.
Wu Huihui, who resides in China, is accused of “facilitating the conversion of virtual currency stolen by [Democratic People’s Republic of Korea] actors working with the Lazarus Group to fiat currency.”
Cheng Hung Man, based in Hong Kong, is suspected of collaborating with Wu to use “front companies to enable DPRK actors to bypass countering illicit finance requirements at financial institutions and access the U.S. financial system.”
Sim Hyon Sop, located in Dandong, China, is employed by Korea Kwangson Banking Corp. (KKBC), which was sanctioned in 2009 for its connections to North Korea. According to the allegations, Sim “coordinated millions of dollars in financial transfers for the DPRK.”
Brian Nelson, the Undersecretary for Terrorism and Financial Intelligence at the Department, referred to North Korea in a statement and said,
“The DPRK continues to exploit virtual currency and extensive illicit facilitation networks to access the international financial system and generate revenue for the regime.”
Lazarus Group’s Connection With Crypto
The Lazarus Group, suspected to be backed by the North Korean government, has been involved in numerous cyberattacks over the years, targeting crypto space recently. OFAC has previously sanctioned two Chinese nationals, Tian Yinyin and Li Jiadong, for their alleged involvement in laundering crypto connected to a 2018 cryptocurrency exchange hack. While OFAC did not disclose the name of the exchange, it did mention that the Lazarus Group was suspected of being linked to the attack.
The Lazarus Group has been associated with numerous hacks over the years, including the high-profile 2022 Ronin Network attack, which is widely considered the largest crypto heist in history. The hackers managed to steal a staggering $625 million during the attack, and the FBI has since traced the crime back to the Lazarus Group.
In addition to these incidents, last year the group was suspected of targeting several Japanese crypto companies. OFAC data indicates that cyber actors with ties to North Korea managed to steal an estimated $1.7 billion worth of cryptocurrency in 2022 alone, demonstrating the group’s continued prominence and threat to the industry.
The Treasury Department suspects that the Lazarus Group has connections to the Reconnaissance General Bureau, which is North Korea’s intelligence agency, and is involved in the trade of arms for the Democratic People’s Republic of Korea (DPRK). It seems that the bureau uses the cryptocurrency obtained through illicit means to finance nuclear and ballistic military programs in North Korea.
US Treasury Accuses DeFi Market For Facilitating Illicit Transfers By North Korean Hackers
The crypto market has recently attracted the attention of cybercriminals who are using these digital assets for illicit activities. In recent years, there has been an increase in the use of DeFi markets to launder illegal crypto money, and North Korean hackers are among the culprits. The US Treasury Department has pointed fingers at the DeFi market, which they say is being used by North Korean hackers for illicit transfers.
DeFi Market Threatens National Security
A recent report from the United States Treasury Department examining decentralized finance revealed that individuals from the Democratic People’s Republic of Korea, along with other fraudulent actors, can take advantage of vulnerabilities to conduct money laundering operations.
The U.S. Treasury’s “Illicit Finance Risk Assessment of Decentralized Finance” report, published on April 6, stated that several illicit groups from North Korea have profited from the non-compliance of some DeFi platforms with specific anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. The report highlighted that inadequate AML/CFT measures and other weaknesses in DeFi services “facilitate the misappropriation of funds.”
Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, commented:
“Illicit actors, including criminals, scammers, and North Korean cyber actors, are using DeFi services in the process of laundering illicit funds. Capturing the potential benefits associated with DeFi services requires addressing these risks.”
Decentralized Exchanges Lack Of AML Controls
The report observed that certain projects had actively promoted the absence of AML/CFT measures as a primary objective of decentralization, pointing out that individuals could frequently bypass sanctions imposed by the U.S. and the United Nations. Nonetheless, the Treasury emphasized that the majority of money laundering, terrorist financing, and proliferation financing took place through fiat currency or beyond the realm of digital assets.
Authorities suggested enhancing regulatory oversight of AML/CFT for platforms providing DeFi services, offering guidance to DeFi platforms concerning AML/CFT, and addressing any existing regulatory deficiencies. US Treasury notes:
“DeFi services at present often do not implement AML/CFT controls or other processes to identify customers, allowing layering of proceeds to take place instantaneously and pseudonymously, using long strings of alphanumeric characters rather than names or other personally identifying information.”
The evaluation was conducted following the executive order on digital assets signed by President Joe Biden in March 2022. With the execution of this order, numerous U.S. government agencies have initiated inquiries into the potential effects of various facets of the digital asset domain on the nation’s financial system and established payment infrastructure.
Bitcoin Outperforms Market Equities and Treasury Bonds: Goldman Sachs Report
The Bitcoin market rallied by nearly 40 percent in the first month of 2023 while the United States treasury bonds earned a fixed income of 4 percent. To put it into a different perspective, an investor who purchased $100 worth of Bitcoin at the start of the year has about $140.
On the other hand, an investor who purchased either a 20 or 30-year U.S. treasury bond worth $100 has approximately $104 at present. However, the latter is risk averse compared to the former, which is described by high volatility both on the small and longer timeframe.
Nonetheless, the Bitcoin market has significantly marketed itself as a better-performing asset in the long haul compared to government bonds. The Bitcoin market has, however, been tarnished by the FTX and Alameda’s implosion which has left hundreds of institutional investors worldwide with a financial dent and has led to a widespread loss of trust in the institution of cryptocurrency.
In a recent report by Goldman Sachs, Bitcoin ranked top among other assets in both total returns and risk-adjusted returns. According to the megabank, Bitcoin outperformed the market equities, precious metals, and also global indexes like NASDAQ 100, Russell 2000, and S & P 500.
Bitcoin Market Outlook
The Bitcoin market celebrated 14 years of existence recently with two countries, El Salvador and the Central African Republic, already using it as legal tender. According to our latest crypto price oracles, Bitcoin is changing around $23,134 on Wednesday with a market capitalization of approximately $446,005,429,271.
Short squeezes and forced liquidations have been attributed to the January 2023 crypto rally. According to aggregate data provided by Coinglass, approximately 22,911 crypto traders have been liquidated about $59 million in the past 24 hours. Nonetheless, the Bitcoin whales have played a significant role in the January crypto relief rally.
2023 Will See Lower Inflation Rates, Predicts US Treasury Secretary
This year, the Fed has been relentless in hiking the interest rates in response to rising inflation. Since interest rates are the principal weapon used by the Federal Reserve (the central bank of the United States), to regulate inflation, they tend to fluctuate in tandem with one another.
Recent rises in interest rates by the Federal Reserve have resulted in precipitous declines in the value of cryptocurrencies.
The next Federal Reserve meeting begins on Tuesday, December 13; if these preliminary findings hold, crypto investors may be in for another rollercoaster week.
Janet Yellen Predicts Lower Inflation Rate in 2023
Janet Yellen is an American economist who has been serving as the 78th Secretary of the Treasury of the United States since January 26, 2021. Prior to that, she was the 15th chairwoman of the Federal Reserve, a position she held from 2014 to 2018.
According to an interview that was shown on Sunday’s episode of “60 Minutes” on CBS, the Treasury Secretary said that she anticipates a decline in inflation in the United States in the year 2023.
In her words:
“I believe you will see much lower inflation by the end of next year if there isn’t an unexpected shock.”
When questioned about the possibility of a recession, the economist responded by saying that there is a danger of one. However, in her opinion, doing so is not something that is required in any way in order to bring down inflation.
She went on to remark that there has been a significant deceleration in economic growth and many firms are aware of this. The world saw a fairly quick recovery from the COVID-19 pandemic, and economic expansion was really strong at that time. In addition to this, there was a significant increase in employment, which helped put people back to work.
“We got people back to work. We closed that gap. We have a healthy labor market. To bring down inflation, and because almost everybody who wants a job has a job, growth has to slow,” said Yellen.
Janet Yellen has said that she hopes the recent increase in inflation is just transitory, and that the U.S. government has learned its lesson about the need to manage inflation after what happened in the 70s.
What a Reduction in Inflation Means For The Crypto Markets
A short-term negative link exists between the news of inflation and the price of cryptocurrency at the present time. This is due to the fact that reports of inflation increase the likelihood that central banks will increase their interest rate targets to even higher levels. There is a correlation between an increase in inflation and a decrease in the value of cryptocurrencies.
If, on the other hand, inflation decreases, as indicated by, for instance, a positive reading of the American consumer price index, then the prices of crypto assets, including bitcoin, will increase.
Wrapping up
Recession is often anticipated in the case of persistent inflation and interest rate increases. These economic woes have put even Elon Musk on edge. The wealthiest man in the world has been sounding the alarm for months, saying that if the central bank continues its current monetary policies, the economy would go into a serious recession.
A rate rise by the Fed would be a terrible idea in Musk’s opinion. He recently cautioned that the decision will cause a much more severe economic downturn than is now anticipated.
Bittrex Charged For Violating Sanctions, US Treasury Agrees To Settle
The post Bittrex Charged For Violating Sanctions, US Treasury Agrees To Settle appeared first on Coinpedia Fintech News
The Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) of the United States Treasury Department reported on October 11 that they had settled charges with the crypto exchange Bittrex. The cryptocurrency exchange was charged with breaking sanctions and failing to establish appropriate sanctions compliance measures from March 2014 to December 2017.
The violations were caused by transactions from “individuals reportedly situated in the Crimea area of Ukraine, Iran, Sudan, Cuba, and Syria,” according to US Treasury regulators. U.S. officials state that the transactions added up to $263M worth of cryptocurrency transactions that were in violation of the country’s financial sanctions.