Here’s what happened in blockchain and crypto this week.
While the fallout from the U.S. Treasury Department’s ban of coin mixing service Tornado Cash continues, U.S. lawmakers are weighing in. In an open letter, U.S. Congressman Tom Emmer requested to Janet Yellen and the Treasury that the department provide clarity on the legality and divergence from precedent of OFAC’s sanctions against the open-source software protocol. The ban made massive waves in recent weeks and led to the arrest of a software developer, the freezing of cryptoassets and banning of Ethereum addresses by large cryptoasset firms and DeFi protocols, among other things. It also caused an outcry in the crypto community since the ban entails far-reaching ramifications for financial privacy and freedom of speech.
First launched in 2019, Tornado Cash is an open-source blockchain protocol for sending and receiving anonymous transactions, also referred to as “mixing”. According to blockchain analysis firm Elliptic, over $7 billion in cryptocurrency has gone through Tornado Cash since its launch, with around 20% of those funds tied to illicit activity. Earlier this month, Tornado Cash was added to the Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list for allegedly aiding and abetting the laundering cryptocurrencies.
The U.S. Treasury Department released a statement saying that the mixer was used by a North Korean hacking group to steal $455 million through several exploits. Under the department’s new designation, all U.S. citizens are banned from being able to send or receive money on the platform and could face criminal penalties for violating the rules. Importantly, the move is unprecedented in that it marks the first time OFAC sanctioned public blockchain smart contracts and addresses as opposed to individuals or entities.
Many in the crypto community have criticized the measures as excessive and unwarranted. This week, U.S. Congressman (MN) Tom Emmer took to Twitter and requested in an open letter to Janet Yellen and the Treasury Department that the department provide clarity on the legality and divergence from precedent of OFAC’s sanctions against open-source software protocol Tornado Cash.
Elsewhere, DeFi protocol Uniswap – the largest decentralized exchange (DEX) – has moved to block 253 addresses with traces to the Tornado Cash protocol. In contrast, USDT stablecoin issuer Tether has maintained its decision not to freeze any wallets associated with the mixer. The stablecoin issuer sees a freeze of secondary Tornado Cash addresses as premature, and awaits more clarity from U.S. authorities. The company said in a statement on Wednesday that “Unilaterally freezing secondary market addresses could be a highly disruptive and reckless move by Tether”.
The global cryptoasset market capitalization currently amounts to $1.04 trillion – down from $1.08 trillion since Friday last week, with bitcoin accounting for 38%. Among the Top 30 cryptoassets by market cap, Cosmos (ATOM) outperformed, gaining roughly 5.7% over the week. During the same period, the price of bitcoin (BTC) fell by 11% to $20,690 after Fed Chair Powell’s hawkish comments in Jackson Hole, while the price of ether (ETH) decreased by 14.7% to $1,578. The total value locked (TVL) in DeFi sits at $60.8 billion – down from $61.9 billion last week – with Ethereum accounting for about 58% of TVL.
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Manuel Trojovsky, Head of Crypto Investments & Research
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