CEO and founder of Shapeshift Erik Voorhees has recommended that the MakerDAO community take precautionary measures after the U.S. Treasury sanctioned Tornado Cash.
Specifically, Voorhees advised MakerDAO users to withdraw their USDC collateral and convert the funds into another stablecoin. But he stopped short of advocating a more censorship-resistant choice.
On Aug. 8, the U.S. Treasury issued a press release stating that crypto blender Tornado Cash had been sanctioned for its role in laundering more than $7 billion worth of illicit crypto funds since 2019. Treasury Under Secretary for Terrorism and Financial Intelligence Brian E. Nelson said:
Despite public assurances to the contrary, Tornado Cash has repeatedly failed to impose effective controls designed to prevent it from regularly laundering funds for malicious cyber actors and without basic measures to address its risks.
The incident led to discussions about government overreach and alternatives to centralized stablecoins.
The end of Tornado Cash
The Tornado Cash website is offline, its developers were booted from GitHub and Circle blacklisted USDC addresses belonging to the organization as a result of the sanctions.
Several months earlier, Circle CEO Jeremy Allaire dismissed claims that the company could freeze USDC accounts for any reason as FUD. He further countered by suggesting that entities operating within the law have nothing to fear.
Coin Center issued a statement on the matter, saying that sanctions against a tool, rather than a person or entity with agency, are a blow to people who wish to preserve their privacy, “including for entirely legal and personal reasons.”
This seems more like sanctioning a tool that is neutral in character and can be used for good or ill like any other technology.
This point has been widely supported by members of the crypto community, who see sanctions as an attack on personal sovereignty.
Big Brother is watching
Bankless founder Ryan Adamsintervened, calling the U.S. Treasury’s actions “the first shot in the big brother assault on crypto.”
In a later tweet, Adam also asked the question, where will this end? Suggesting that Uniswap could be next, then Ethereum – further insinuating tiptoeing to totalitarianism.
If the software isn’t secure, then the word isn’t.
In response to the USDC’s censorship, a researcher at the NEAR Protocol DeFi Proximity platform, @resdegena proposed the development of a new decentralized stablecoin free of government guidelines.
Resdegen considers Reflexer’s Rai and Liquidity’s LUSD to be 100 percent decentralized, but both are collateralized, which is a disadvantage in terms of scalability. Resdegen suggested developing a new project that would be algorithmically indexed using BTC or ETH derivative contracts.