[shiado]

With FinCEN Notice 2020-2 it's clear that the US wants to treat crypto as foreign bank accounts to coerce disclosure but that severely limits the scope of regulation they can do as it would place public blockchains as strictly not being American jurisdiction, and it would make monitoring American activity on these blockchains outside of the scope of domestic agencies and spy agencies would not be legally able to spy on American activities on these blockchains. When you understand these facts it explains why the US pursued dubious NK sanctions over what would be a much stronger case of considering the Tornado Cash protocol an unregulated bank which it is. There is a very big technical and legal distinction between what centralized BTC mixers do with UTXOs to be considered laundering and how the Tornado Cash protocol exploits how ETH works on-chain to combine ETH in a single account without taking KYC.

[legutierr]

> considering the Tornado Cash protocol an unregulated bank which it is

This is a very strong statement to make without also making a legal argument to back it up.

Just because you assert that it is a bank does not make it so. What precedents, statutes and regulations would you cite to support your assertion?

[x-complexity]

Seconded. The actions that can be done with Tornado Cash are specific & finitely-defined: Even if it could be translated into regular banking terms, what Tornado does is not something that a normal bank does, & what Tornado provides is nowhere near the functionality that a regular bank performs for its depositors/lenders.

[salawat]

>US wants to treat crypto as foreign bank accounts to coerce disclosure but that severely limits the scope of regulation they can do as it would place public blockchains as strictly not being American jurisdiction, and it would make monitoring American activity on these blockchains outside of the scope of domestic agencies and spy agencies would not be legally able to spy on American activities on these blockchains.

...You have no idea how this'd shake out do you?

OFAC'll be able to still do it's thing, the only thing it needs is LE or IC input saying "Yup, sanctioned individual's value is there."

Domestic law enforcement will have literally no legal impediment to surveilling the blockchain, because guess what? It's public! They don't even need a warrant to serve. You just send it on over to their node. With a financial institution, you at least generally have a shot at counsel requiring a warrant to be served.

Jurisdiction is going to be determined based on where you (the operator of the transacting medium) operate.

Hell, I could see the potential for some intrepid implementer to put in-line packet analyzers capable of creating a signal propagation map to home in on where a candidate block originated, causing a reversion back to the old school system under which enforceable strict liability will disincent anyone but people willing to participate in good faith from processing anyone else's transactions.

In the end, the only people who have really gotten anything out of this fad, were the people who cashed out early in the hype cycle, and the government/regulators who now jave a medium much more condicive to centralized surveillance.

Good job, lads.

[polygamous_bat]

> it would make monitoring American activity on these blockchains outside of the scope of domestic agencies and spy agencies would not be legally able to spy on American activities on these blockchains.

I am genuinely not sure, is it still "spying" if the information is public for anyone and everyone to see? If I publish an attested list of my daily foreign transactions on my blog, I don't see why the government can't use that to prosecute me just because the website may be hosted offshore without it being considered "spying".