This week in crypto we’ve seen Tornado Cash get a kicking by U.S. authorities, which has has ramifications in unexpected areas, and also an update to the crazy story of Alexandr Vinnik. But which story hits the bullseye? I wonder…
No. 3 – MakerDAO Founder Suggests Ditching USDC
The creator of the MakerDAO protocol and its DAI stablecoin, Rune Chirstensen, this week suggested that the protocol should “seriously consider” dumping USDC from its collateral after the stablecoin’s maker, Circle, froze 75,000 coins after the Tornado Cash sanctioning.
Chirstensen took umbrage at Circle’s actions and, as a result, suggested that the DAO governing the protocol should prepare for the “inevitable” of ditching the stablecoin. Circle froze 75,000 USDC coins on the addresses that were sanctioned by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on Monday (more on this later), an action that highlighted the control it has over the coins on the network.
DAI’s collateral is made up of more than 50% USDC, and Christensen is worried that the coins could simply be seized by Circle, which would immediately crash the DAI value. To this end, he suggests removing DAI and replacing it with other assets, which immediately drew comparisons to the Terra collapse.
No. 2 – Alexandr Vinnik Faces U.S. Authorities at Last
Alexandr Vinnik, the man whose exchange laundered hundreds of thousands of bitcoin for Silk Road sellers and the Mt. Gox hackers, is finally facing U.S. justice after a five year battle. Vinnik was arrested in July 2017 on a U.S. arrest warrant after his site, BTC-e, was found to have assisted in laundering $4 billion worth of illegally obtained bitcoin, but a three-way struggle between the U.S., France and Russia emerged as to who would get him first.
During the battle, which led all the way to the Greek Supreme Court and included an attempt on his life, Vinnik was at one time promised to all three nations. He went on hunger strike in 2019 to protest at his treatment, before he was finally extradited to France in January 2020.
Vinnik was released last month after serving just one year of a five year sentence in a Paris jail, and extradition to the U.S. was quickly approved soon after his release. His appearance before U.S. Magistrate Judge Sallie Kim marked the start of his fight against a 21-count indictment which could see him imprisoned for up to 50 years.
No.1 – Tornado Cash Sanctioned by OFAC
This week’s top story is, of course, the sanctioning of Tornado Cash by OFAC. The mixing service was targeted because of its heavy use by North Korean hacking group Lazarus, with 44 Ethereum addresses also sanctioned. This means that any U.S. entity interacting with either the protocol or the addresses will be contravening sanctions law.
The Tornado Cash website and Github was taken down, although, in accordance with its design, the smart contract could still be called by those who knew how. OFAC was accused of overreach by those who said it unfairly targeted people who used it for legitimate reasons, and the move had knock on effects elsewhere – Circle froze 75,000 USDC coins connected to the Ethereum addresses, introducing some people to the power that such entities have over their coins, which then led, as we know, to MakerDAO considering drastically rebuilding the entire model for its DAI stablecoin.
Tornado Cash is now the second mixing service to be targeted by OFAC, after Blender.io was given the same treatment for the exact same reason.
Honourable Mentions
Other cakes from the crypto bakery worth tasting this week include:
- A hack victim has sued Google over allowing a fake Phantom Wallet app into its play store, costing him over $880,000 in losses.
- Iran paid for an unnamed import in $10 million worth of cryptocurrency, marking the first such use as the country seeks to evade U.S. sanctions
- Exchange Hotbit has had to suspend operations after its senior executives were called to speak to the police about the actions of a former project manager
We’ll be back next week for another review of the week’s top crypto news.
