Today, Coin Center filed an amicus brief in Roman Storm's criminal case. The government has wrongly charged the Tornado Cash developers with criminal conspiracy and we are here to help set the record straight and defend First Amendment rights to publish software.
Our brief
A new SEC proposal has a serious change hidden within its complex language.
Bottom line: The proposal violates the First Amendment by requiring a license to speak—even of open source developers. It’s unconstitutional and they should change it.
Coin Center is pushing back 👇 1/
I know there's a lot going on right now but I don't think the head of the BIS saying "central banks will have absolute control" over your financial transactions with CBDCs has gotten enough attention.
Tornado, Samourai, and a Warning:
In a surprising and concerning shift, the DOJ has targeted non-custodial crypto wallet developers for unlicensed money transmission, which starkly deviates from longstanding U.S. policy.
This abrupt move, seen in recent charges against
1/ New detailed factual explanation of how Tornado Cash works. Huge thanks to
@wadeAlexC
and
@LewellenMichael
for this unbiased description of exactly how the contracts function. It confirms a level of decentralization that was surprising, even to me.
America, home of the free. Where you will be accused of crimes for choosing not to design software the way the government wants you to design software:
Senators Warren and Marshall's proposed bill subjecting software devs & nodes to AML is "a repudiation of liberal values and a move towards the types of surveillance and control prized by authoritarians like Vladimir Putin, Xi Jinping, and Kim Jong-un"
This is the most outrageous thing I've encountered since starting at Coin Center in 2014. Alexey Pertsev deserves to be free or else charged with a crime. In the US they can't hold you for more than 72 hours. This 6 hours or up to 90 days Dutch rule is an affront to human rights.
Sensational early reporting on the scale of Hamas crypto fundraising significantly misstated the amounts involved. In this important debunking Chainalysis shows how actual terrorist usage may be 1/2-of-1% of the previously reported numbers.
I saw the best minds of my generation destroyed by blockchain, hyped-up, networking in the street, and nakedly unaware that an oracle database would suffice.
The study of complexity has revealed that each of us has a far greater impact on the lives of others than we might expect, and far less ability to understand what that impact might be.
Can't think of a better reason to be extra kind, stoic, and peaceful as I go through my life.
If the infrastructure bill is the first time you are learning about Senator Wyden check out this 1996 speech where he argues for a hands off, market-based approach to crypto (which stands for cryptography). He's a national treasure.
1/ Responding to Senator Warren's bill reminded me why I still believe in crypto: electronic cash.
A defining characteristic that separates America from illiberal regimes like North Korea, China, and Russia is our reverence for individual autonomy, privacy, and dignity.
Please feel free to hate Bitcoin, but do not let that hatred push you into the arms of totalitarians who want to leverage financial surveillance to eradicate minority ethnicities, cultures, and languages.
It’s time to have the conversation: Is the Bank Secrecy Act unconstitutional?
Beyond the speech and privacy issues, the BSA is a sweeping delegation of law making power. Today we're publishing a new report explaining in detail why that's a problem.
📜Full report is linked in the
Today: These guys are talking about Bitcoin in the Senate and this guy is launching his electric sports car to mars. Don't ever complain about the cypherpunk future that you got.
What I've learned. Keep this gif playing on your phone under the desk and glance at it to stay zen while testifying about ICOs in front of angry congressmen:
Here are our initial thoughts on today's Tornado Cash indictment. The factual allegations of unlicensed money transmission are in conflict with FinCEN's longstanding guidance that an "anonymizing software provider is not a money transmitter."
If the SEC news today has you confused or frustrated. I highly recommend you read our comment letter from last April (yes, same rulemaking). It summarizes the rule change wrt crypto and outlines why it would likely be unconstitutional.
1/ OFAC today repealed the Tornado Cash designation that Coin Center is challenging in court and then replaced it with a new one. Nothing they've announced changes our strategy in this lawsuit.
"The law deserves respect, but technological progress should not be bound by the limits of the regulator’s lawyerly imagination." SEC Commissioner Peirce gave an incredible speech about tokens and regulation. Read it all:
When someone says they regret not banning Bitcoin back when it was small they're revealing a willingness to run roughshod over people's rights, but only when those people are a marginal minority.
FYI the 10 years of clear guidance from FinCEN that says that money transmission in crypto requires control over the funds is irrelevant because pans transfer heat and usb cables transfer bits without controlling heat and bits.
Fedwire has two back up facilities. One in New Jersey and one in Richmond. 💵
Bitcoin has (checks notes) 10,195 backup facilities in over 100 countries across the world. 🚀
You need to see this. This is NOT a crypto problem. Every institution crypto or trad is about to face massive ID fraud because of AI. Crypto is, in fact, the only solution, b/c physical ids and pictures of them is now a garbage fire of fake (actually has been for a long time but
New: inside the underground site where "neural networks" churn out fake IDs
- I tested, made two IDs in minutes
- used one to successfully bypass the identity verification check on a cryptocurrency exchange
- massive implications for crime, cybersecurity
📃📃📃 Read our newly published deeper analysis of the Tornado Cash OFAC action:
I'm particularly proud of our procedural due process analysis. This may be even stronger than the First Amendment claims.
BREAKING: the Biden Administration is cancelling the fake
#Bitcoin
mining "emergency" declaration and destroying the data that it illegally collected.
The government is going to restart the process the legal way: with public notice and comment.
The government is also paying
If you buy a cow and didn't know it was pregnant and the cow was pregnant and the baby was a mutant swamp monster cow baby and the IRS found out.... income event.
I don't know who needs to hear this but if the big regulatory battles are being fought about a different cryptocurrency, it's not because your preferred crypto is more decentralized, it's because governments aren't worried about the things it does and how it does them.
It's one thing to do "regulation by enforcement," as we've arguably seen from the SEC. It's even worse to see the DOJ engage in regulation by criminal prosecution.
That's exactly what is happening with the unlicensed money transmission charges against Tornado Cash and Samourai
🚨 We're still digesting the potential constitutional ramifications. Either way, big development in real limitations on your legitimate privacy rights. Read the post.
That wallet in your pocket? it's a money transmitter. How do I know? Because the DOJ says that if you can only put money into it and take money out of it, then you don't actually have control over it, the wallet developer does.
Everyone knows that the US pioneered the internet because in 1994 Congress voted to make the x.25 packet switching network illegal, detained the developers of the xanadu project, and thereby cemented TCP/IP as the global standard.
Some morning spiciness excerpted from our broker comment letter to the IRS:
We can only speculate why the Treasury Department is brazenly going beyond the statutory authority granted them by Congress and seeking to impose recordkeeping and reporting requirements on persons who
Technology got us into this mass surveillance mess (credit cards, electronic banking); hopefully technology can get us out (cryptocurrency, zk proofs).
Our take on the Treasury DeFi Assessment:
"To summarize, our constitutional rights to speech and privacy are not a gap in the money laundering laws. They are the supreme law of the land."
Read the whole thing:
By not providing for a fully anonymous bearer instrument currency that works online our government is failing to uphold a basic liberty assumption that was shared by our founding fathers: that every American can pay and get paid without anyone else involved.
Building a company from scratch to successfully code the first version of a zk-powered privacy-respecting electronic cash by bodging together academic papers and the bitcoin core client. Releasing it open source. Organizing some of the largest and most consequential multi-party
@SenWarren
@USGAO
Two claims in this post are misleading or false.
1. False claim: the post says that crypto does not already follow the same anti-money laundering rules as "everyone else."
For at least 11 years now, the exact same AML rules have applied to intermediated crypto activities as to
I'm getting that old feeling where I'm headed to school and still haven't done the homework for the day. Except the homework is base layer privacy for cryptocurrencies and the school is all the laws that will crush anything with censorship resistance but no privacy.
It bothers me that when Senator Warren discussed her bill in the hearing today she kept saying, "shouldn't we apply the same rules to crypto as banks?" (A) we already do, crypto institutions in a position of trust have been required to register as MSBs since at least 2013. (B) 1/
Commissioner
@HesterPeirce
is asking the hard questions in the SEC Open Meeting about the "exchange" redefinition. She is simply reading comment letters from the last comment period and asking if any given factual hypotheticals fit the "communications protocol" definition. 1/3
1/ New Crypto Bill in Senate: read this thread or our post for the full download on what it does and what risks it poses to software developers and individual crypto users.
Palley on the rule of law and practice as a lawyer in this country: How are you supposed to advise clients if nothing has the permanence of law? Not only is the regulator's website saying something different than the DOJ, it's been saying the same different thing for over 10
Just think about how you’d feel as a client if your lawyer explained that the regulatory guidance on a federal government agency website isn’t dispositive and you might still go to prison if you follow it but that you can’t ask the prosecutors for guidance in the alternative.
The cypherpunk ideal is not about anonymity, it's about free speech and free software. Anonymity is not an end, it's a tool to protect freedom when challenged by illiberal regimes. Full talk:
The inclusion of "unhosted wallet provider" in today's draft broker form indicates that the IRS is not heeding our warnings from last fall (when the broker NPRM was open for comment). Continuing down this road will lead to tax policies that are contradictory to the statute passed
"based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions." - Director Hinman, SEC Division of Corp Fin.
i like people who tweet from their phone but still don't capitalize the first letter (and actually go and delete the auto-cap) because they want to look like they don't give a shit
Seeing articles talking about "outrage amongst crypto advocates" That's bullshit. There should be outrage amongst anyone who believes in the rule of law and basic human dignity. There should just be outrage, full stop.
Today Coin Center filed a comment explaining why the First Amendment arguments against the rule are strong and why the Supreme Court is poised to rule against the SEC should it finalize this new rule as drafted. 2/
The emergence of anonymous electronic cash & decentralized exchange software could spur new financial surveillance policy. Here's my new comprehensive paper on why licensing software developers or deputizing them to spy on users would be unconstitutional.
Giancarlo says: no blockchain without bitcoin. AND that had blockchain's ability to reveal and check counterparty risk existed in 2008 we may have had more and better policy choices available to respond to the crisis.
In a revenue ruling released yesterday, the IRS doubled down on classifying block rewards as income when received (rather than taxing them when they are sold). This is brazenly arbitrary policy from the IRS and also bad law. 1/
Antipathy towards strong encryption, cryptocurrencies, and censorship resistance is equivalent to antipathy towards individual rights and self-sovereignty online. At a basic level it is unamerican.
"A broad power to ban and disrupt information technologies should not be wielded without appropriate oversight & opportunity for review. The RESTRICT Act not only fails to ensure these rule of law protections, in many cases it attempts to subvert them."
Breaking from Fincen: looks like 15 day comment extension for CTR requirement and 45 days more for proposed counterparty recordation rules. Will need to review and we haven't beat this yet, but I'm very proud of the pressure our community has applied.
The "CBDC's would prevent ransomware" arguments are dangerously confused for several reasons. One I haven't seen mentioned, however, is that the central server for a CBDC would be the perfect target for ransomware.
Senator Warren's bill asks for unconstitutional sanctions on Americans who are helping to undermine the Russian war machine. If it passes Putin wins another battle against democracy and self-determination.
Chilling effects. The DOJ's aggressive, ungrounded, and unconstitutional interpretation of money transmission laws is bad for Americans and freedom and good for the Russian government and authoritarianism.
At the
@ACF_int
we relied on Wasabi when protecting our donors from Russian government’s surveillance and risks of imprisonment. That was not taken into consideration by the US authorities when they began attacking privacy tools
If you were of a hyper-advanced civilization--effectively no aging or illness, no scarcity or conflict--would you sign up for an ~80 year game: you are born w/o your earlier memories, live an uncertain life, in a fictional past universe, and then die, awake, and remember it all?
Good morning to xenophobes who mistake their disdain for foreign peoples as national security, mistake energy for pollution, mistake capital flight from an authoritarian regime as money laundering, and mistake Bitcoin's promise to undermine tyrannical governments and build energy
1/ Today's John Deere tractors simply don't work and can't be fixed without access to proprietary software maintained by the company. Their value, including their resale value, is highly dependent on the continued efforts of the manufacturer to keep that software up to date.
Yes, yesterday's SEC NPRM (34-94062) is going to be a problem for crypto space, software devs in particular. Main issue we'll address in comments is first amendment problems inherent in regulating providers of "communications protocol systems." 1/
ZK-based privacy tools are truly not mixers. You can only ever remove the assets you deposited (not someone else's). No commingling of assets required. No mixing. A law abiding American with eth in tornado contract isn't touching anyone else's eth, North Korea included.
Good news! "Science" has replaced heart healthy naturally occurring stearic acid in beef with unstable, highly processed, instantly rancid polyunsaturated fats from seeds!