In a follow-up opinion<\/a> piece, Coin Center research director Peter Van Valkenburgh argues that the claims in the indictment appear to run counter to guidance from the United States Financial Crimes Enforcement Network \u2014 arguing that Tornado Cash only provides the software to transmit money rather than transmitting the money itself.<\/p>\n New Tornado Cash indictments seem to run counter to FinCEN guidance<\/p>\n Coin Center\u2019s initial thoughts on a case that could potentially criminalize the publication of software codehttps:\/\/t.co\/YCBv3vsZAE<\/a><\/p>\n \u2014 Neeraj K Agrawal (@NeerajKA) August 23, 2023<\/a><\/p><\/blockquote>\n “The only thing the indictment claims regarding the defendants\u2019 unlicensed money transmission is that they ‘engaged in the business of transferring funds on behalf of the public’ and did so without registering with FinCEN,” wrote Valkenburgh.<\/p>\n But does the indictment state any facts that actually show that the defendants engaged in any activities that qualify as money transmission under the relevant law?<\/p><\/blockquote>\n He pointed to an interpretation by FinCEN as to what constitutes \u201cmoney transmission services\u201d under the U.S. Bank Secrecy Act, which states:<\/p>\n \u201cAn anonymizing software provider is not a money transmitter<\/a>.\u201d<\/p>\n Valkenburgh then referred to another excerpt stating that only people using the software can be considered money transmitters:<\/p>\n \u201c[A] person that utilizes the software to anonymize the person\u2019s own transactions will be either a user or a money transmitter, depending on the purpose of each transaction.\u201d<\/p><\/blockquote>\n While Valkenburgh said that Tornado Cash made it easier for individuals to use the protocol\u2019s smart contracts to transmit money, he argued it doesn\u2019t mean that the developers were money transmitters themselves. <\/p>\n \u201c[But] that doesn\u2019t somehow mean that they became transmitters merely because they provided tools that others used to transmit their own money,\u201d Valkenburgh explained. <\/p>\n Valkenburgh also criticized claims in the indictment suggesting that Storm and Semenov had complete control over the protocol\u2019s smart contracts.<\/p>\n \u201cEthereum smart contracts are variable and sometimes people have no control over their operation, some control, or total control. This is the key fact needed to determine whether one is performing money transmission,\u201d he argued.<\/p>\n Related: <\/em><\/strong>Crypto lobbyists still fighting to axe \u2018unlawful\u2019 Tornado Cash sanctions <\/em><\/strong><\/a><\/p>\n Coin Center first voiced its opposition toward the U.S. Treasury in October when it sued the agency for its unprecedented and unlawful sanctioning<\/a> of Tornado Cash.<\/p>\n The OFAC indictment claims Storm and Semenov ran an unlicensed money transmission<\/a> service by engaging in the business of transferring funds on behalf of the public. The enforcement agency claimed the developers should have registered with FinCEN.<\/p>\n Semenov was added to OFAC\u2019s list of Specially Designated Nationals and Blocked Persons on Aug. 23, while Storm was arrested by the Federal Bureau of Investigation in Washington state on the same day.<\/p>\n Alexey Pertsev, another one of Tornado Cash\u2019s founders, was imprisoned by Dutch authorities in Aug. 2022<\/a> before being released in late April.<\/a><\/p>\n Valkenburgh believes the outcome of the Tornado Cash saga will have a profound impact on the legal rights of United States citizens to build and publish software in the future.<\/p>\n Magazine: <\/em><\/strong>Magazine: Tornado Cash 2.0 \u2014 The race to build safe and legal coin mixers<\/em><\/strong><\/a><\/p>\n\n
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