Powell joined the chorus of voices calling the Tornado ban "unconstitutional," adding that it was a "knee-jerk" response to Terra's collapse.

Kraken CEO Jesse Powell denounced the U.S. government’s ban on crypto transaction privacy tool Tornado Cash as “unconstitutional.”

Speaking to Bloomberg on Tuesday, he said that “people have a right to financial privacy,” adding that he doesn’t believe the sanctions will survive a challenge in court. 

The U.S. Treasury Department said on August 8 that it had taken the measures because criminals had used the privacy mixer “to launder more than $7 billion worth of virtual currency since its creation in 2019.” 

Indeed, $7 billion is roughly the total amount of funds that have passed through the privacy tool; but according to blockchain sleuths Elliptic, just $1.5 billion of that sum was indeed ill-gotten.

Total amount of laundered funds on Tornado Cash. Source: Elliptic.

Powell described the ban as “mostly a knee-jerk” response to the Terra ecosystem’s collapse back in May, and said the removal of Tornado’s source code from Github, where it was originally hosted, “was not necessary.” 

A representative confirmed to Decrypt last week that Github had removed the code, but replied that the “smart contracts are on the Ethereum blockchain. It doesn’t change anything for Tornado Cash contracts.”

Tornado’s shockwaves

Powell joins a long list of crypto advocates who have condemned the sanctions.

Uniswap inventor Hayden Adams stressed his belief in the need for legal privacy tools. Adams called the sanctions a “freedom of speech issue,” echoing several industry leaders on Twitter, who cited the 1996 Federal court case “Bernstein v U.S.,” which established “source code as speech” protected by the First Amendment. 

 

The sanctions discussions came to a head Last Friday when Dutch police arrested a “suspected [Tornado] developer” in Amsterdam. 

The 29-year-old was charged with “involvement in concealing criminal financial flows and facilitating money laundering through the mixing of cryptocurrencies through the decentralized Ethereum mixing service Tornado Cash.” 

 

Several crypto advocacy groups have also pushed back on the U.S. Treasury Department’s Tornado Cash ban.

The Electronic Frontier Foundation said, “there are clear First Amendment implications whenever the government inhibits the publication of computer code on a public website.”

Meanwhile, Coin Center has said that OFAC overstepped its bounds and “potentially violates constitutional rights to due process and free speech.”

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