Tornado Cash Sanctions Will End Up Undermining the US and Strengthening Crypto
Like any aging empire, America is reacting to its competition.
Opinion
The US government's endorsement of the open source code that makes up Tornado Cash's privacy protocol may be shocking, but it's not surprising. America has tightened its grip on the global financial system for decades, ostensibly to curb bad behavior, but also to project its power abroad.
Economic sanctions, such as those applied by the aptly named Office of Foreign Assets Control, are a powerful weapon. The agency's website says it "implements economic and trade sanctions based on U.S. foreign policy and national security objectives." It does so to combat drug traffickers, terrorists, and "other threats to the national security, foreign policy, or economy of the United States."
Scary stuff, especially when enforced by the world reserve currency issuer. But therein lies the rub, because the more the United States militarizes access to the dollar, the greater the incentive for all other countries to find an alternative. A likely winner of this momentum is Bitcoin (BTC). To understand why, we need to study the architecture of money.
Fiat currencies like the US dollar do not have an inherent transfer mechanism. Large payments can only be made through the banking system, and banks need government charters to operate. This symbiotic relationship allows governments not only to control the issuance of their currency, but also to access it. For the issuer of a reserve currency, monetary censorship becomes a powerful weapon, arguably as destructive as bombs and bullets.
Related: Tornado Cash Shows DeFi Can't Escape Regulation
Bitcoin is different because it has its own censorship-resistant payment system. Anyone can make payments to anyone else, with or without the involvement of a licensed intermediary. Rulers...
Like any aging empire, America is reacting to its competition.
Opinion
The US government's endorsement of the open source code that makes up Tornado Cash's privacy protocol may be shocking, but it's not surprising. America has tightened its grip on the global financial system for decades, ostensibly to curb bad behavior, but also to project its power abroad.
Economic sanctions, such as those applied by the aptly named Office of Foreign Assets Control, are a powerful weapon. The agency's website says it "implements economic and trade sanctions based on U.S. foreign policy and national security objectives." It does so to combat drug traffickers, terrorists, and "other threats to the national security, foreign policy, or economy of the United States."
Scary stuff, especially when enforced by the world reserve currency issuer. But therein lies the rub, because the more the United States militarizes access to the dollar, the greater the incentive for all other countries to find an alternative. A likely winner of this momentum is Bitcoin (BTC). To understand why, we need to study the architecture of money.
Fiat currencies like the US dollar do not have an inherent transfer mechanism. Large payments can only be made through the banking system, and banks need government charters to operate. This symbiotic relationship allows governments not only to control the issuance of their currency, but also to access it. For the issuer of a reserve currency, monetary censorship becomes a powerful weapon, arguably as destructive as bombs and bullets.
Related: Tornado Cash Shows DeFi Can't Escape Regulation
Bitcoin is different because it has its own censorship-resistant payment system. Anyone can make payments to anyone else, with or without the involvement of a licensed intermediary. Rulers...
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