Tornado Cash sanctions will ultimately undermine the US and strengthen crypto
The United States' move to sanction the open-source code that makes up the Tornado Cash privacy protocol may be shocking, but it’s not surprising. America has been tightening her grip over the global financial system for decades, ostensibly to cut down on bad behavior, but also to project power abroad.
Economic sanctions, like the ones enforced by the aptly named Office of Foreign Assets Control, are a powerful weapon. The agency’s website states that it “enforces economic and trade sanctions based on U.S. foreign policy and national security goals.” It does this to fight drug dealers, terrorists, and “other threats to the national security, foreign policy or economy of the United States.”
Scary stuff, particularly when enforced by the issuer of the global reserve currency. But therein lies the rub because the more the U.S. weaponizes access to the dollar, the greater the incentive for every other country to find an alternative. One likely winner from this dynamic is Bitcoin (BTC). To see why, we need to study the architecture of money.
Fiat currencies like the U.S. dollar have no inherent transfer mechanism. Large payments can only be made through the banking system, and banks need government charters to operate. This symbiotic relationship enables governments to not only control the issuance of their money, but also access to it. For the issuer of a reserve currency, monetary censorship becomes a powerful weapon, arguably as destructive as bombs and bullets.
Related: Tornado Cash shows that DeFi can’t escape regulation
Bitcoin is different because it has its own censorship-resistant payment system. Anyone can make payments to anyone else — with or without the involvement of a licensed intermediary. Governments can still
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