U.S. Sanctions Tornado Cash, Dutch Arrest Software Developer. Begun, the Crypto Wars Have


On 2022-08-08, the U.S. Treasury “Office of Foreign Assets Control”, which administers sanctions, has sanctioned Tornado Cash, a privacy-protecting smart contract system that runs on the Ethereum blockchain, making its use by any U.S. person a criminal offence. This appears to be the first time a piece of software as opposed to an individual or organisation has been made subject to sanctions, and it created a precedent for arbitrarily banning any piece of software the U.S. considers “might” be used for purposes of which it disapproves.

Earlier today, 2022-08-12, Dutch authorities arrested a 29 year old man in Amsterdam “believed to be a developer for the crypto mixing service Tornado Cash, which the United States put on its sanctions list this week”. “The Dutch public prosecutor’s office for serious fraud, environmental crime and asset confiscation (FIOD) said Tornado was suspected of having laundered more than $7 billion worth of virtual currency since it was created in 2019.”

Now, notice, what the developer (who has not been named) did, was to write a piece of software, namely an Ethereum smart contract, make the source code freely available, and post the contract on the Ethereum blockchain where anybody can use it. He was not a party to any of the transactions which may have used it, and had no control over who might use it. This creates a precedent for criminalising software development if some subsequent user of the software uses in a way governments disapprove.

In addition, GitHub has deleted the source code repositories for Tornado Cash and reportedly deleted the personal accounts of some people who contributed to the project. This is a precedent for prior restraint against the publication of software based upon its content and allegations of potential for mis-use by unrelated third parties.

As Yoda would say, “Begun, the Crypto wars have”. Now is the time at which the battles over whether “Code Is Speech” will directly affect the rights to privacy and free expression of billions of people around the world. We now know on which side the United States stands in this conflict.

Here is a talk by Peter Van Valkenburgh of Coin Center on 2022-08-09 at Zcon3 on the imposition of sanctions against Tornado Cash and its legal implications.


My hazy memory recalls a time – 20+ years ago? – when people printed computer code on t-shirts as a way of demonstrating that, in so many words, “code equals speech”. I ca’t rember if the object of the protest was export regulations, the DeCSS DVD-descrambling code, or something else.

The arrest referenced having a similar smell, my first reaction is: “that arrest is bull$4!t”.

On the other hand, cryptocurrencies, as currently implemented, seem to be fundamental enablers of computer crime. If not for BTC and friends, would crypto-locking malware be as lucrative as it seems to be?

Is cryptocurrency-enabled crime the cost of doing business? Can we do no better? How to reconcile free speech absolutism with a desire to not promote the destructive actions of computer crime syndicates?


This was probably the “munitions T-shirt” which was popular during the first crypto war in the 1990s.

This contained the complete Perl code for an implementation of the RSA key exchange algorithm, which was one of the items the U.S. classified as a munition subject to export control under the International Traffic in Arms Regulation and deemed a U.S. citizen exporting it or assisting in its use outside the country to be a felon. The Perl code is:

#!/bin/perl -s-- -export-a-crypto-system-sig -RSA-3-lines-PERL
$m=unpack(H.$w,$m."\0"x$w),$_=`echo "16do$w 2+4Oi0$d*-^1[d2%Sa
pack('H*',$_)while read(STDIN,$m,($w=2*$d-1+length($n)&~1)/2)

and the original shirt encoded it below the listing as a barcode. The version pictured above has updated this to a QR code

Here is how to run the Perl code with the RSA test case.

This also fit nicely into a USENET-era signature block. I had one.

--- John Walker --- (E-mail) --- <http://www.fourmilab.ch/> ---
#! /usr/local/bin/perl -s-- -export-a-crypto-system-sig -RSA-in-3-lines-PERL
($k,$n)=@ARGV;$m=unpack(H.$w,$m."\0"x$w),$_=`echo "16do$w 2+4Oi0$d*-^1[d2%
Sa2/d0<X+d*La1=z\U$n%0]SX$k"[$m*]\EszlXx++p|dc`,s/^.|\W//g,print pack('H*'
,$_)while read(STDIN,$m,($w=2*$d-1+length($n||die"$0 [-d] k n\n")&~1)/2)
TRY:echo squeamish ossifrage | rsa -e 3 7537d365 | rsa -d 4e243e33 7537d365
Have you exported a crypto system today?  --> http://dcs.ex.ac.uk/~aba/x.html

Well, as always, one has to ask, “Compared to what?” Coercive governments funded by fiat monopoly paper money have been responsible for wars that killed around a hundred million people in the last century, and have used control over money to coerce their citizens and often prevent them from voting with their feet. I’d say breaking the government monopoly on money, allowing the free market to provide alternatives among which people can freely choose, and escape the hidden confiscation of depreciating money is probably worth the cost of tightening up the shoddy level of computer and network security we have tolerated to reduce the incidence of “computer crime”. (I put the phrase in ironic quotes, as I always do, because I do not believe that using a computer in the commission of crimes which already existed for centuries changes things in any way. Most of the motivation for “computer crime” laws is to impose restrictions on civil liberties exercised via computer which citizens would not have tolerated before computers came on the scene.)

Anent shoddy security, did anybody see the one about the guy who discovered that Hyundai’s car firmware updates were protected by a public/private key pair which had been given in an tutorial on RSA encryption? Mit der Dummheit kämpfen Götter selbst vergebens. — Schiller, 1801


Anonymity of Bitcoin founder Satoshi Nakamoto is prescient regarding makers of Tornado Cash and other cryptocurrencies that are in the crosshairs of the powerful (CCP and USA and other nations defending their fleeting monopoly on currency).


Is this Satoshi Nakatoma?


Here is a 2019 article from Bitcoin.com, “The Many Facts Pointing to Nick Szabo Being Satoshi Nakamoto”.


One gets no argument from me about the evils of fiat currency.

When I ponder the “best we can do”, I’m wondering if (a) it’s conceptually possible to escape a fiat system via cryptocurrency without amplifying the ease of doing evil things (probably not?), and (b) what are the chances that such a system could gain the support of any government.

To me, the (a) question is more philosophical than technical, while (b) relates to my suspicion/fear that the answer will always be “no”.

I’m frankly terrified of what governments can and will do to my meager fiat-rulered retirement nest-egg. I wish some cryptocurrency could help me escape, but I’m very far from convinced that such an escape will be permitted. One vote in $legislative_body and one pen-stroke of $executive later, and $crypto_holdings evaporate. Am I wrong?


How do they evaporate? Yes, certainly if all (or enough) governments collude to shut down the transaction clearing networks for a cryptocurrency, then holders of that currency will be frozen in place with no way to spend or exchange their currency. But that is a much lower risk that having all of one’s wealth denominated in a single fiat currency which can be devalued, or subject to export controls, or banned from exchange for other currencies, or any of the other things which have happened to such currencies frequently. Just ask any Argentine. Assuming you have cryptocurrency verified on the blockchain and you control your own private keys, there is no way it can be seized or frozen by a single or limited group of governments as long as the network remains operational.

If you remain in the jurisdiction of a government attempting to seize crypto, and they can identify you as the holder of the currency, they may try to use coercion to force you to surrender your private key, but at least you have the choice to resist, obstruct (“the cat ate it”), or flee, assuming you have enough out of their reach to set up outside their grasp.

This has happened before. When the U.S. seized gold in 1933, U.S. citizens who had prudently stashed some gold outside the country were just fine as long as they’d been discreet about it. Similarly, Britons who had gotten money out of the UK before World War II were unaffected by the severe limits on the amount of currency citizens could take out of the country for years after the end of the war.

The centralisation and snooping today is far worse than it was in those times. If you are sanctioned and unable to use the SWIFT money transfer system, you may be unable to transfer money in any currency anywhere on the system. Many banks outside the U.S. now refuse to do business with U.S. nationals due to the costly and intrusive FATCA disclosure requirement, and the situation within the European Union is rapidly becoming just as bad. Traditional money haven territories such as Switzerland have largely caved to U.S. and EU coercion and now disclose account holder information to the government of which they are a citizen.

Crypto is, for now, a way around most of this. The imposition of “Know Your Customer” rules, the ability to follow the trace of transactions through the blockchain, and the active effort to shut down privacy-preserving tools such as mixers are reducing the usefulness of crypto in this regard, but it’s still better than most of the alternatives other than physical gold coins or gem quality diamonds purchased for cash from a trusted dealer who keeps no records. And crypto is, if you’re careful, a lot more secure and portable.

The volatility is a powerful deterrent to many, but if you look at it as “what would you be happy with if everything else were seized or went to zero”, you can largely ignore it. Besides, if everything else goes to zero or there’s massive instability in fiat, the purchasing power of crypto is likely to soar.


From Zcash, a blockchain-based payment system based upon zero-knowledge proofs.


I am way out of my depth on Bitcoin and its competitors, but I do know a little about how difficult it is to keep power plants supplied, equipment running, electricity flowing, servers running, etc. My naive expectation is that, if there is massive instability in the future (Come on! We all know it is going to happen sometime), then the ability to transact in bitcoins is going to become tenuous.

Favorite story from the Austrian/German inflation days – the old lady whose financial resources depreciated to nothing along with fiat, but she survived quite successfully. She still had her late husband’s highly tradable store of fine cigars.


Well, in the case of a complete grid-down civilisational collapse as envisioned in James Wesley Rawles’s Patriots or William Forstchen’s One Second After, the only assets that are going to matter are “beans, bullets, and band-aids”—all financial assets that are credit-based and rely on clearing, whether centralised or distributed, are going to be worthless. But if the running water, sewers, and food distribution infrastructure collapse, money is going to be the least of the problems for the survivors who escape the 95% die-off which will happen within six months.

The value of cryptocurrency is that it allows one to opt out of the fiat money racket and the ever-ratcheting up surveillance and control over individuals’ disposition of their assets, which is about to get a lot worse with the introduction of central bank digital currencies which can be linked to a Chinese-style social credit system.


In total civilizational collapse. where power & internet go down, cryptocurrencies will indeed turn out to have failed as a “store of value”. On the other hand, in that hungry world, the value of fiat, bonds, stock certificates, land titles, even gold bars and diamonds, are likely to be very limited. Only usable real goods or services will have value.

But what about something less total? When the situation got serious in the 1930s, FDR had no compunction about seizing physical gold from citizens, greatly reducing its “store of value” function. Might we imagine government goons in any country (not just places like New Zealand!) being given the authority to break down doors, seize electronic equipment, and compel owners by whatever means necessary to surrender their cryptocurrency?

The “medium of exchange” function of money is easily handled by all kinds of mechanisms. Supposedly, in war-torn Europe at the end of WWII, unopened packs of America cigarettes were widely accepted in all kinds of transactions. But the “store of value” function of money depends on a functioning society with a lot of trust – that function is much more difficult to create & maintain.

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Many people in the “prepper” community have suggested that .22 long rifle ammunition may become the currency of choice after TEOTWAWKI. It is small, portable, has utility in its own right, doesn’t degrade over periods of decades with minimal storage requirements, and can easily be tested for authenticity (pick one or a few from those being tendered and try them in your gun).

Cryptocurrency, if obtained without a trail that leads to the bearer (which is difficult as “know your customer” regulations are forced upon crypto exchanges and mixers and other privacy tools are attacked), and properly stored (the best way is a piece of paper with the private keys, replicated and kept in a place the Man won’t find it or, better, multiple key parts in separate locations with a specified number required to reconstruct the key [I have a tool for that]) is very difficult to seize. First, they have to know you have it, and then they need to find the paper(s) with the keys. There is no electronic equipment in the loop. A key simply looks like (for Bitcoin):


and you can encode it with a steganography tool to make it less obvious when hidden in plain sight:

Glamours, nettling beclasps, smallish militias cottoned outcrows.
Spikier gabling bisnagas hurtling earlaps grues, jotters. Pubic oversoft eeriness, achier. Relapsed cubage percher. Hails, planche cage connect malmseys roentgen. Dioceses ryas, bungling afoot. Plink dinero jar beshouts operably evincive.

Slalom dogcarts rifest bogans. Knaps, ere desires. Slummy rebounds bereaved conceits splurgy alleged googols. Exclave slag criminal riparian fixture.

Put this on page 173 of a 350 page novel you’ve downloaded from Project Gutenberg, in a directory with 200 other novels and let them try to find it. All you need to remember is the book title and page number.


That is very clever! I guess I simply have a more jaundiced view about what Our Betters will do to get the keys from the “terrorist” (their word) who refuses to surrender his cryptocurrency to their lawful (their word) demand. Even today, people who have done nothing wrong have been beaten up, denied medical attention, thrown into solitary confinement for over a year – all legally (their word). When Our Betters’ needs get serious, it is very unlikely that crypto-holders who fail to comply will get the kid-gloves Guantanamo Bay treatment.

Maybe what is needed is a way to prevent knowledge of one’s ownership of crypto ever getting out? Or to hold a token small crypto-asset that could be surrendered in apparent compliance while the main crypto-asset remains hidden? It is not a future that any of us ever wants to see – but that does not mean it won’t happen.


From xkcd 538.


Lawsuit against US: