{"id":485124,"date":"2022-08-16T17:47:40","date_gmt":"2022-08-16T14:47:40","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/tornado-cash-shows-that-defi-cant-escape-regulation\/"},"modified":"2022-08-16T17:47:40","modified_gmt":"2022-08-16T14:47:40","slug":"tornado-cash-shows-that-defi-cant-escape-regulation","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/tornado-cash-shows-that-defi-cant-escape-regulation\/","title":{"rendered":"# Tornado Cash shows that DeFi can\u2019t escape regulation"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3be2905815f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3be2905815f\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/tornado-cash-shows-that-defi-cant-escape-regulation\/#%E2%80%9D_Tornado_Cash_shows_that_DeFi_cant_escape_regulation_%E2%80%9C\" >&#8221; Tornado Cash shows that DeFi can\u2019t escape regulation &#8220;<\/a><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Tornado_Cash_shows_that_DeFi_cant_escape_regulation_%E2%80%9C\"><\/span>&#8221; Tornado Cash shows that DeFi can\u2019t escape regulation &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div class=\"post-content\" data-v-28d77a7a>The U.S. Treasury\u2019s Office of Foreign Assets Control (OFAC) issued <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/home.treasury.gov\/news\/press-releases\/jy0916\">sanctions<\/a> against Tornado Cash this month, marking its first action against a decentralized finance (DeFi) mixer in what may prove to be a watershed moment for DeFi regulation.<\/p>\n<p>A lack of response and regulatory preparation from the industry is perhaps unsurprising of a mindset honed outside the rule of law. Yet, the potential of DeFi is threatened if its leaders do not face the reality that regulation in this space will only increase. Taking steps to work with regulators is now the only way forward. <\/p>\n<p>On Aug. 8, OFAC targeted Tornado Cash for processing transactions <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/hub.elliptic.co\/analysis\/tornado-cash-mixer-sanctione\">totaling<\/a> more than $1.5 billion on behalf of illicit actors, including North Korean cybercriminals. The consequences of the action are severe: US individuals and companies, including crypto exchanges and financial institutions, are now prohibited from transacting with Tornado Cash addresses. <\/p>\n<p>This will hinder criminals\u2019 ability to launder funds through the service, which has become a prolific part of the cybercrime ecosystem. However, OFAC\u2019s action against Tornado Cash sends a clear message to everyone in the space: DeFi is now firmly in regulators\u2019 crosshairs and won\u2019t escape regulation. <\/p>\n<p><em>RELATED:\u00a0Tornado Cash community fund multisignature wallet disbands amid sanctions<\/em><\/p>\n<p>History tells us it is inevitable now that regulatory scrutiny will only accelerate. Prevailing \u201cDeFi think\u201d is a tendency to ignore or brush this fact under the carpet, but a rethink is needed. Regulators\u2019 motives are not malevolent. They are simply toeing the very fine line of suppressing crime without neutering the positive potential of DeFi.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-08\/52c067ff-d745-43a2-acfb-7e8c49102cb7.jpeg\"><\/figure>\n<p>To evidence this, a Financial Action Task Force (FATF) report <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.fatf-gafi.org\/media\/fatf\/documents\/recommendations\/Targeted-Update-Implementation-FATF%20Standards-Virtual%20Assets-VASPs.pdf\">published<\/a> earlier this year noted that cross-chain bridges are facilitating the growth of DeFi, but are also enabling criminals to swap funds more swiftly, generating money laundering risks. The negative focus is on the crime \u2014 not the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> or its potential. <\/p>\n<p>DeFi developers and those participating in the ecosystem will seriously need to consider working with regulators on compliance issues if they want their projects to succeed. <\/p>\n<p>Concerningly, the reaction of many DeFi developers and others in the ecosystem has been to shrug and argue that DeFi is, by nature, unregulatable. Because regulation involves imposing rules on centralized inter<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>ries, the argument runs, regulating DeFi is not possible. Consequently, many DeFi projects have not attempted to comply because they believe they are safely beyond regulators\u2019 reach. <\/p>\n<p>For some, the hope of a convincing facade of regulatory compliance has been comforting enough. But Tornado Cash renders this unrealistic. The mixer repeatedly claimed to be complying with OFAC sanctions; however, the U.S. Treasury indicated in its statement on Tornado Cash that it \u201crepeatedly 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.\u201d Window dressing will no longer suffice. Thorough compliance protocols are now a requirement. <\/p>\n<p>Fortunately, some within the industry are alive to this reality, and there are a handful of DeFi projects that have begun to implement compliance controls in anticipation of regulation. However, this kind of preparation is far from widespread which is a worry for anyone hoping to see a competitive DeFi ecosystem in the future. <\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">POV: it\u2019s the year 2076 and the government is closing in on your 26 acre property in Montana after it was discovered someone on crypto twitter sent you .10 Eth from tornado cash 53 years ago <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/t.co\/YWWAJGHizY\">pic.twitter.com\/YWWAJGHizY<\/a><\/p>\n<p>\u2014 John W. Rich Kid (Wendy\u2019s Fry Cook) (@JohnWRichKid) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/JohnWRichKid\/status\/1558514755723198465?ref_src=twsrc%5Etfw\">August 13, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>The specter of institutionalization perhaps presents an explanation for the lack of alignment between regulators and the industry. DeFi\u2019s beginnings are defiant and off-grid, whereas regulators\u2019 recent attention to the space suggests that they and their bedfellows in big finance and investment industries spy an opportunity. <\/p>\n<p>Such is their interest: the integration of DeFi into the mainstream is now inevitable. Heavily regulated institutions see compliance as a precondition for participating in the DeFi space, and will avoid fully embracing the space until they\u2019re confident it is compatible with regulation. <\/p>\n<p>Investors are also sensitive to frameworks that mitigate reputational damage and protect them against risks. No investor will want to sink their money into a DeFi project that winds up blocklisted for facilitating activity with the likes of North Korea. Within this paradigm, DeFi initiatives that are unresponsive to these regulatory concerns have a fast deteriorating shelf-life. <\/p>\n<p>The Tornado Cash saga has shown that the costs of failing to factor regulation into DeFi development are now too great to ignore. Compliance activities inevitably come with costs too, but as the institutionalization of DeFi looks increasingly inevitable, it is those who actively look to embrace regulatory compliance as they build out the DeFi ecosystem that will tread the path to growth as others fall to the wayside. <\/p>\n<p><em>This article is for <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> information purposes and is not intended to be and should not be taken as legal or investment advice.\u00a0<\/em><em>The opinions expressed are the author\u2019s alone and do not necessarily reflect the views of Cointelegraph.\u00a0<\/em><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/tornado-cash-shows-that-defi-can-t-escape-regulation\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Tornado Cash shows that DeFi can\u2019t escape regulation &#8220; The U.S. Treasury\u2019s Office of Foreign Assets Control (OFAC) issued sanctions against Tornado Cash this month, marking its first action against a decentralized finance (DeFi) mixer in what may prove to be a watershed moment for DeFi regulation. A lack of response and regulatory preparation&#8230;<\/p>\n","protected":false},"author":1,"featured_media":485125,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDgvNTBkMmM1MDAtZGUwMi00NzA2LTgxZjUtYWJjMTVkOGFmYTljLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[15047,74858,74932,74863,74983,78261,71511,55229,70934],"class_list":["post-485124","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-privacy","tag-bitcoin-regulation","tag-crimes","tag-cryptocurrencies","tag-decentralization","tag-tech-analysis","tag-government","tag-law","tag-regulation"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/485124","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=485124"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/485124\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/485125"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=485124"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=485124"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=485124"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}