Friday, Sept 27, 2024

privacy on trial, Chinese channels, tradfi custody, crypto "money"

“The fact that we live at the bottom of a deep gravity well, on the surface of a gas covered planet going around a nuclear fireball 90 million miles away and think this to be normal is obviously some indication of how skewed our perspective tends to be.” –Douglas Adams ||  

Hello everyone, and HAPPY FRIDAY!!! Like you, I’m grateful the weekend is here – but I do sort of wish the weeks wouldn’t fly by quite so fast.

I haven’t yet published the stablecoin roundup this week, I know… “Events” got in the way, and I’m conscious of email length (if they’re too long, that can affect deliverability). Incoming next week! Lots to report on that front.

No recording today, sorry, I have an impossible schedule this afternoon. 😕

IN THIS NEWSLETTER:

• Who is liable?

• Chinese channels

• The launch of tradfi custody

• Paypal and crypto “money”

• More fintech stablecoins?

If you’re not a premium subscriber, I hope you’ll consider becoming one! It’s the price of a couple of New York coffees a month, and you get ~daily commentary on how macro moods are influencing crypto markets, and also on how crypto is impacting the macro economy.

WHAT I’M WATCHING:

Who is liable?

A US judge ruled yesterday that the Department of Justice’s case against Tornado Cash developer Roman Storm will proceed to trial. He is charged with money laundering, operating an unlicensed money transmitting businesses and violating international sanctions, as his decentralized and anonymous coin mixer was used by bad actors such as North Korean hackers.

This will be a spicy one, as it rests on whether software developers are liable for what happens on the programs they write, and what constitutes a “money transmitter”. It also gets to the heart of whether technology-enabled privacy should be a right – Tornado Cash was often used by innocent individuals who want to protect their privacy and enhance their personal security by hiding blockchain traceability.

The ruling itself is contentious, in that the judge does not think that “control” is sufficient for the act of money transmission, which in turn has the obligation of control – in other words, despite not being able to control the app’s use and despite not holding customer funds, Tornado Cash should comply with money transmitter AML/KYC rules. Does this make all crypto wallets money transmitters?

Also, to be declared guilty of money laundering, the prosecution does not need to prove that Storm knew about specific users or illicit transfers – it just needs to prove that he knew bad stuff was happening on his platform, and didn’t do anything about it.

I’m not a lawyer, but I’m trying to figure out why engineers wouldn’t be held liable for getaway cars escaping on a bridge they built, or gun makers wouldn’t be liable for gun-related murders. They know bad things happen because of their output. It’s to do with the nature of money, perhaps? But why are crimes involving money judged differently from crimes involving hardware? Or maybe it’s the regulatory obsession with money laundering, obviously the root of all evil?

The trial could also end up being about much more than privacy; it could also touch on free speech. Storm has alleged that code is a form of expression, and therefore protected under the First Amendment. The judge disagreed. Could this be a tentative step towards encryption becoming illegal?

Chinese channels