Crypto Privacy Legalized? Tornado Cash And Samourai Cases Suggest Uncertainty Remains
Last week, Deputy Attorney General (DAG) Todd Blanche made a significant announcement that had the cryptocurrency community buzzing with excitement. In a memo addressed to Department of Justice employees, Blanche directed the agency to cease prosecuting mixers, exchanges, and “offline wallets” for the criminal activities of their users. This move was seen as a step towards re-establishing privacy rights within the crypto space, prompting celebrations and calls for the release of individuals like #FreeSamourai.
However, legal experts and scholars are cautious about the implications of the memo. While it does signal a shift in focus for the DOJ towards targeting individuals who use digital assets for criminal activities such as terrorism, organized crime, and hacking, there are still uncertainties surrounding the enforcement of regulations. The memo specifies that platforms could still face enforcement actions if evidence is found that they were aware of customers using digital assets for illicit purposes.
One key concern raised by industry publication Law360 is the ambiguity surrounding who the DOJ considers to be using digital assets for criminal activities. The memo excludes a specific subsection of USC 18 §1960, which is central to ongoing prosecutions like the cases of Roman Storm and the developers of Samourai Wallet.
The prosecution of these cases will continue to set precedents regarding the liability of developers of non-custodial services for the actions of their users. Questions remain about how software developers can implement Know Your Customer (KYC) checks for non-custodial wallets and whether they will be subject to money service business licensing requirements.
Former CFTC chair Timothy Massad suggested that the future of KYC in the cryptocurrency space may involve digital identities and smart contracts to prevent illicit use of Bitcoin. This aligns with the US government’s move towards implementing Real ID compatible driver’s licenses for domestic air travel, with plans to expand it to a comprehensive digital identity system.
As the crypto community awaits the outcomes of ongoing prosecutions and navigates the evolving regulatory landscape, it is clear that the implications of the DOJ’s memo are complex and far-reaching. The future of privacy and security in the cryptocurrency space will be shaped by how these legal challenges are addressed and resolved.
This guest post by L0la L33tz highlights the need for careful consideration and vigilance as the industry moves forward in a rapidly changing regulatory environment. Opinions expressed in this post are the author’s own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
