[yieldcrv]

Maybe, but you might be misunderstanding how that works as well as assumptions about crypto user stories.

there is a sanction on US persons from merely interacting with the deployed Tornado Cash contract, so there is a potential fine and prison sentence for just doing that. The license removes that liability.

the assets you receive out of Tornado Cash can be used the same as before. Exchanges may flag those funds arbitrarily, but other smart contracts and merchants do not. Many people stay directly on chain and pay for goods and services, and invest, without issue. Many people can derive real world benefits from things they purchase with their crypto, whether that thing is digital or physical. Its not about "cashing out", but if so, those people can still just deposit into some onchain lending service and cash out the borrowed funds, as exchanges themselves don't dig that deep and if that individual has the OFAC license it doesn't matter.

for those that choose to go to the treasury to get a license, they can always prove provenance of their tornado cash assets and prove they're clean, which is a key feature of tornado cash. so its not a good assumption that the treasury would target that person to make a deal, because there wouldn't be any liability at all, only the novelty of making the application for the license.

[User23]

> The license removes that liability

As you evidently know, that's the defining characteristic of a license: it removes criminal or civil liability for an otherwise illicit act. For example a Barber's license permits a person to hold a knife to someone's throat without it being assault, modulo some additional conditions. So much for generalities.

To the specifics, you look to be quite well informed on this particular matter. Are you saying that someone that has assets in Tornado that they cannot otherwise cash out without violating sanctions can lawfully sell them to a licensee, but nobody else? Because if so that sounds like a wonderful buying opportunity for the licensee. Or is getting a license trivially easy, such that anyone with assets legally tied up can just go through a TSA pre level process to establish that they're not an international terrorist drug dealing child trafficker, or whatever activity these sanctions are meant to discourage?

[yieldcrv]

My example is limited to

a) the person already having assets in Tornado Cash also being the licensee to withdraw assets from Tornado Cash. the assets they withdraw are as liquid as any other non-TC assets and do not have to go to a fellow licensee.

b) a person that wishes to continue depositing assets into Tornado Cash is also the person that is the licensee.

the only reason for the license is for interacting with the Tornado Cash smart contract - as by default that is currently a sanctions violation for US persons - it has nothing to do with whether another recipient is comfortable accepting those assets, and that isn't a limitation of liquidity at all.

Hope that makes sense. The license is just a bureaucratic nuance for people that dont want to gamble with liability. They can totally try to hide it and risk a sanctions violation charge.