They are setting a precedent that any forks or similar implementations of this protocol will also be sanctioned.
A comparison would be sanctioning the Matrix protocol because it facilitates end-to-end encrypted communication for terrorists.
It's basically an HTTPS layer. You roll up some set denomination of ETH or whatever into a zero knowledge note, which can then be treated like cash. Anyone who has the private key can generate a request to send the note somewhere else, and there's nothing linking the creator of the note to the spender of the note.
Never once has it been marketed towards criminals, or have any of the team made any indication that it was build for criminal purposes. It appears it was actually in heavy use for three years or so before Lazarus apparently used it for the first time, which is why the sanctions were slapped on it. Fuck Lazarus, but also the idea that anything tech they use becomes illegal is insanity.
In short, if you are not concealing the source of your funds to conceal a crime being committed, you are not guilty of money-laundering. It's that simple. KYC laws apply to banks and corporations, not individuals and not protocols and not code.
Privacy is not against the law, and neither is deploying a privacy tool that happens to be used by criminals. The comparison to matrix is surprisingly apt here. I have no doubt that criminal activity is facilitated by matrix, but the idea that they are responsible for that is ridiculous.
I would tell you to just look at the Tornado Cash code yourself to verify this, but alas...
Onion routing does, sure.
Ethically I find that area very much a double-edged sword. It's great for privacy and people evading speech-hostile regimes, but it does also enable trading and propagation of CSAM etc. It's why I've never run a Tor or Freenet (does that still exist?) node, I don't want to support that stuff with my resources.
No, it just encrypts between the ends, hence it being called "End to End Encryption". You're going beyond that if you're talking about hiding the fact that the origin and destination are talking to each other at all.
> If Alice and Bob and John and Piper are all communicating with pseudonymous names in a Matrix room, you do not know who is talking to who or what they are talking about.
Maybe so, but in other E2EE products the fact of communication is not obscured to someone who has access to the traffic. E2EE just means there isn't a server in the middle that decrypts everything before relaying, or any sort of master key they could use to do that with.
Matrix looks like a great system, but it's not the only E2EE product, nor does it define the term.
1. You are using and supporting the same protocol that they are also using. As the application grows and improves because more people are using and supporting it, the criminals are also being helped.
2. You are creating cover. The more people that use Tor and Matrix, the more secure it becomes for all users within the network.
If you and a criminal are both using the same Matrix server, neither you nor the host would know. Your plain text messages are going into the protocol, getting mixed and encrypted, and then spit out the other end.
The express purpose of an end to end encrypted chat protocol is to provide privacy. If users of it engage in criminal behavior that does not mean the express purpose of the protocol is also criminal.
You cannot launder money, though. This is forbidden regardless of which method you use (crypto, art, car washes, etc). These sanctions are saying "we consider this specific use of this specific algorithm to be illegal, so if you interact with it via these wallets you will be sanctioned too". But they are not saying "this algorithm is illegal".
Even then, the algorithm and Tornado are not the same thing. It seems unlikely you can use Tornado itself for this purpose, even if the algorithm itself is useful.
The press release specifically calls out a lack of efforts to block known bad actors and illegal funds from using their system:
> Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks.
So you probably can provide a mixing service if you can find ways to reasonably limit money laundering on it. This would probably be antithetical to the decentralization principles built into Tornado, but might allow continued legal operations.