Example of a “legitimate” use case for tumbling: your employer pays you in Bitcoin and you don’t want them to know where you spend the money they give you.
A public ledger means anyone can read it, not just the government. And so anonymizing your transactions means hiding them from everyone, not just the government.
It’s fine if you believe the government and your bank should be able to read your transactions. But what about your crazy ex girlfriend or the guy you fired last week?
Tornado Cash wasn't free, there was a fee which as I understand it was sent back to various developers.
Money laundering doesn't get to be something else and totally fine just because it's covering for a weakness of cryptocurrencies.
> If you don't want your transactions to be public, don't use a public ledger.
That's exactly what people were attempting to do, with Tornado.
> You don't get to launder your money
There is no money laundering available with Tornado, it doesn't turn an illigitimate source of funds into a legitimate one. And it also has a compliance tool to allow proof of transfer between accounts.
> Tornado Cash wasn't free, there was a fee which as I understand it was sent back to various developers.
This wasn't sent to developers. It was a fee you would pay relayers to propagate transactions on the network and was optional. You could choose to fund withdrawals with a relayer or to use funds in your own wallet.
> Money laundering
This isn't money laundering.
Privacy is definitely a legitimate use for something like Tornado Cash, what are you talking about? Hell, if someone found out what my address is and it's not in my best interest that this person knew about it, I would definitely use it just to move my funds to another address.
If you sell me a screwdriver and then I go and kill someone with it, should you be prosecuted for it?
They really shouldn't.
Neither should any other security researcher who publishes exploits.
Neither should any other developer of cryptographic technology.
What about automobile manufacturers? They kill almost as many people as guns (in the US, quick google search)
Money laundering, especially running a money laundering business which does not follow certain rules, is illegal regardless if some of the usage is legitimate.
Tools to hide the source or destination of funds, i.e. to launder money, are not legal anywhere and explicitly illegal in various ways. Providing them as a service to others is explicitly illegal.
Building, selling, owning, and using a gun are all legal in general, only specific ways of doing those things are not.
We know that the person arrested "is suspected of involvement in concealing criminal financial flows and facilitating money laundering through the mixing of cryptocurrencies through the decentralised Ethereum mixing service Tornado Cash."
The general interpretation is that they were arrested for development of the protocol and software. It may be that they have them on the hook for other actions, such as assisting particular individuals or directly handling funds. Let's see what comes out of this.
We don't yet know which specific acts they are suspected of.
If the state can arrest people and cause activity to stop, it makes sense in the way states think.
The approach of bitcoin and crypto process in general hasn't been to ask permission but aim for a protocol that states can't stop. Neither governments nor "society" "signed off" on crypto. People just started doing it with the principle "this is too distributed to stop". Well, if states can stop it, that approach failed, right?
Analogously when joint-stock corporations first entered the scene it required the development of whole new branches of Western law.
Limited-liability enterprises still aren't very popular. But these were legitimized by courts and legislation based on them provide (alleged) benefits. Crypto generally hasn't been legitimized by society, crypto advocates often act like they don't need such legitimization and by that token, the state has no obligation not to treat crypto activities as being within it's existing categories - especially it this work: they don't like money laundering and fraud through crypto and hey, a lot of people going to jail.
We shall see if that's the case here. My guess is the state can't stop it
I mean, the FBI has already shown it can see through mixers and arrest those who try to cash stolen bitcoins.
China has made sale or possession of bitcoin a crime but the West is following different road - with enough state intervention, bitcoin will wind-up a public money, less private money system than regular bank accounts. Every transaction is on the blockchain and that is public. Try putting that in your "anarcho-capitalist" pipe and smoking it.
source?
A knife is widely regarded as a tool that's legal to own and that, save a few precautions, you can carry with you. Switchblades, despite being also knives, are widely considered dangerous and their sale and possession is overall restricted (presumably) due to a strong correlation between the presence of a switchblade and stabbings.
Just because SMTP and Tornado are protocols it doesn't mean they are the same - one is a protocol enabling a wide range of activities (some of them criminal, some not) while the other is literally designed to hide the origin of money, an activity that most governments frown upon.
The Layering phase is when the original source of money is concealed through transactions or bookkeeping tricks.
Tornado Cash doesn't move the funds between financial systems at all
"Layering conceals the source of the money through a series of transactions and bookkeeping tricks"
The source of the coins is in plain sight - it's clearly from Tornado Cash, and when converted into fiat currency the source is very likely also obvious (some exchange) unless you do some in-person exchange of cash for coins, in which case this has nothing to do with Tornado Cash
"Integration, the now-laundered money is withdrawn from the legitimate account to be used for whatever purposes the criminals have in mind for it"
Again there's no legitimacy for the coins after going through Tornado Cash and the fiat currency is still under scrutiny.
If you just go dirty wallet -> clean wallet -> exchange it’s trivial to see that the exchange coins came from the dirty wallet. If you mix the coins from the dirty wallet to the clean one there’s no way for the exchange to say the coins came from the dirty wallet, all they know is the coins came from the mixer.
The problem is it doesn't make sense to treat protocols like companies. And it definitely doesn't make sense to treat protocol devs as if they were the executives of those companies. The CEO of a bank and the lead dev of a protocol have very very different powers and responsibilities, and we can't just throw our hands up in the air and say "the law's the law, and you gotta follow it" (even when it's literally impossible given the decentralized and autonomous nature of the protocol).
Analogously when joint-stock corporations first entered the scene it required the development of whole new branches of Western law. That law had to be tailored to reflect the realities and nature of joint-stock corporations. What would have been very dumb is simply to pretend like nothing changed and say "same rules apply" and make individual shareholders liable for the action of the corporate entity the same way we're trying to make software devs liable for the action of the decentralized protocol.