450m is a whopping 6% of all deposits on Tornado Cash[1]. The total percentage of illicit activity on the protocol is reported to be in the 10-30% range[2].
What percentage of activity in an E2EE chat application like Matrix is illicit? If a significant but minority percentage of its use is facilitating criminal discussion, should those open protocols also be sanctioned?
This isn't about the fraction of illicit use. A large fraction of Americans with numbered/anonymous Swiss bank accounts did nothing wrong with them - a much larger fraction than tornado cash users. However, they were still banned for US citizens due to US KYC rules.
The land of free speech is obsessed with being able to trace money as it travels. No surprise they would go after a service whose explicit purpose is to break the chain of custody on money.
Sure. Then it is irrelevant how much money was funding whom, only that a non-zero amount of value was not strictly traceable through typical financial surveillance systems, and so the US automatically deems this activity illegal regardless of how the funds were used.
This is where the “privacy on the blockchain should be a basic right” argument comes in, and what the plaintiff appears to be arguing.
When you want to make legal arguments, you do it when you have good facts, and this is not that time.
The facts about Tornado cash are terrible: pretty much everyone using it is either doing something provably illegal or trying to avoid being found, you have to go out of your way to use it (and pay an extra fee), and it's been part of a large number of bad news stories about crypto theft. A minimum of 10% of its throughput is provably due to frauds and thefts, and probably a lot more. It is not an exaggeration to say that many people's life savings have been funneled through Tornado cash into the wallets of criminals. In comparison, numbered Swiss bank accounts likely had more legitimate use than Tornado cash.
In comparison, the facts about Monero, Zcash, and the Wasabi BTC wallet (another mixer, but attached to a wallet) are a lot better. Privacy is free and/or the default option with those services, and they are a little more like cash: lots of victimless crimes (darknet sales, etc.), some use by ransomware attacks, but also a lot of legitimate use.
This lawsuit has a nonzero chance of throwing out the baby (privacy on blockchains) with the bathwater (tornado cash).
25% of funds being illicit does not mean “pretty much everybody” is using it for illicit reasons. Your argument really falls apart here, but the sweeping generalizations don’t help.
Monero and TC are equal parts useful for non-criminals who are seeking privacy.
It's also worth noting the headline of that link: "Crypto Mixer Usage Reaches All-time Highs in 2022, With Nation State Actors and Cybercriminals Contributing Significant Volume"
Quoting from later in that study, "Overall, if we label cybercriminal organizations with known nation state affiliations, we can see that these groups make up a significant and growing share of all illicit cryptocurrency sent to mixers."
It's not 10-30% as you summarized. It's 12% last year increasing to 23% this year, or nearly doubling from a 1/8 to 1/4 share.
This source does not support the position that illicit traffic is an insignificant share of mixer traffic.
There is no doubt known cyber criminals and enemies of the US are using this tool. The question I raised is: what percentage of illicit activity is acceptable? If the E2EE chat app Matrix facilitates 10-30%, should it also be considered a primarily criminal tool worthy of a sanction?
I will point out that of the 170 or so nations recognized widely on Earth right now.. many or most have changed borders substantially, pretty recently.. and almost every one has changed leadership and political control. The concept of a Nation being illegal somehow is related to markets control and military alliances.. I am not convinced that individuals from the three or four major world powers get to declare whole nations with different law, to simply be illegal.
The land of free speech is obsessed with being able to trace money as it travels. No surprise they would go after a service whose explicit purpose is to break the chain of custody on money.