Tornado Cash indictment fails to show ‘clear violation’ of certain legal guidelines: Coin Center

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Crypto advocacy group Coin Center has criticized the newest indictment of two former Tornado Cash builders, arguing that the info provided do not show any clear violations of money-transmitting-related offenses.

Roman Storm and Roman Semenov have been indicted by the United States Office of Foreign Asset Control on Aug. 23 for conspiring to function an unlicensed money-transmitting business, amongst different expenses.

In a follow-up opinion piece, Coin Center analysis director Peter Van Valkenburgh argues that the claims within the indictment seem to run counter to steerage from the United States  Financial Crimes Enforcement Network — arguing that Tornado Cash solely supplies the software program to transmit cash relatively than transmitting the cash itself.

“The solely factor the indictment claims concerning the defendants’ unlicensed cash transmission is that they ‘engaged within the enterprise of transferring funds on behalf of the general public’ and did so with out registering with FinCEN,” wrote Valkenburgh.

But does the indictment state any info that truly show that the defendants engaged in any actions that qualify as cash transmission beneath the related legislation?

He pointed to an interpretation by FinCEN as to what constitutes “money transmission services” beneath the U.S. Bank Secrecy Act, which states:

“An anonymizing software provider is not a money transmitter.”

An excerpt from FinCEN’s Virtual Currency Guidance from 2019. Source: FinCEN.

Valkenburgh then referred to one other excerpt stating that solely folks utilizing the software program may be thought of cash transmitters:

“[A] person that utilizes the software to anonymize the person’s own transactions will be either a user or a money transmitter, depending on the purpose of each transaction.”

While Valkenburgh mentioned that Tornado Cash made it simpler for people to use the protocol’s good contracts to transmit cash, he argued it doesn’t imply that the builders have been cash transmitters themselves.

“[But] that doesn’t somehow mean that they became transmitters merely because they provided tools that others used to transmit their own money,” Valkenburgh defined.

Valkenburgh additionally criticized claims within the indictment suggesting that Storm and Semenov had full management over the protocol’s good contracts.

“Ethereum 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,” he argued.

Related: Crypto lobbyists still fighting to axe ‘unlawful’ Tornado Cash sanctions

Coin Center first voiced its opposition towards the U.S. Treasury in October when it sued the company for its unprecedented and unlawful sanctioning of Tornado Cash.

The OFAC indictment claims Storm and Semenov ran an unlicensed money transmission service by participating within the enterprise of transferring funds on behalf of the general public. The enforcement company claimed the builders ought to have registered with FinCEN.

Semenov was added to OFAC’s record of Specially Designated Nationals and Blocked Persons on Aug. 23, whereas Storm was arrested by the Federal Bureau of Investigation in Washington state on the identical day.

Alexey Pertsev, one other one of Tornado Cash’s founders, was imprisoned by Dutch authorities in Aug. 2022 earlier than being released in late April.

Valkenburgh believes the result of the Tornado Cash saga could have a profound influence on the authorized rights of United States residents to construct and publish software program sooner or later.

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