Cryptocurrencies

The conviction of Alexei Burtsev, developer of the Tornado Cash coin mixing protocol, comes from a chilling explanation

The conviction of Alexei Burtsev, developer of the Tornado Cash coin mixing protocol, comes from a chilling interpretation of criminal liability that is likely to have broader ramifications for cryptocurrencies.

The guilty verdict handed down by the Dutch court means that Burtsev must now serve a five-year and four-month prison sentence for money laundering through Tornado Cash. This is despite the fact that Burtsev had no direct role in the money laundering operation itself.

Andrew Balthazor, a litigator at law firm Holland & Knight, spoke with Cointelegraph to explain the implications of the ruling.

“Mr. “Burtsev’s conviction reinforces the views of many governments that software developers who make their software available to the public will bear responsibility for the foreseeable consequences of the public’s use of that software,” Balthazor said.

“Under this theory of liability, it is not a defense to deny knowledge of a specific criminal act or to point to the technical limitations of the software in preventing its misuse by criminal actors. (…) It is the responsibility of the developer to create mechanisms to reduce or prevent potential criminal use of its software.

When asked whether governments holding this view include the United States, Balthazor said: “Yes, that appears to be the position of the United States as evidenced by the indictments in the Tornado Cash case filed domestically by the Department of Justice – (Department of Justice).”

This interpretation of responsibility differs significantly from how most people understand it in the traditional sense. Natalia Latka, director of public policy and regulatory affairs at blockchain analysis firm Miracle Science, told Cointelegraph how the theory has evolved over time.

“Historically, software developers have been viewed as neutral creators of tools and platforms, responsible for their technical functionality but not for how those tools are used,” Latka said.

“This perspective stems largely from the idea that technology itself is neutral, and that its use depends on the intentions of users. This perspective is beginning to change, especially with the emergence of decentralized networks that challenge traditional regulatory frameworks.

Latka explained that developers “must now take into account the legal implications and potential misuse of their creations.”

Crypto is aware of the impact of the court’s decision

The cryptocurrency community quickly realized the importance of Burtsev’s trial, taking to social media to condemn the conviction.

Source: Eleonore Blanc

Eleonore Blank, founder of CryptoCanal – the events company behind the ETHDam conference in Amsterdam – approached X to discuss the social media implications of the experiment. She conducted a thought experiment to ask whether “Tornado Cash” couldn’t easily be “any cryptocurrency of your choice.”

Blank told Cointelegraph why she found the issue so troubling.

“They systematically ignored all the defense arguments,” she said. “As such, you can easily extrapolate and see how this specific court ruling can be interpreted more broadly for more use cases in the cryptocurrency industry.”

Blanc went on to personalize X’s ruling further, saying: “As cryptocurrency creators, we are all Alexey. We continue to fight for him, his legacy, and the values ​​of cypherpunk.”

Future, another member of the X community, went on to consider what this responsibility model would mean if applied outside the world of software development.

The Conviction Of Alexei Burtsev, Developer Of The Tornado Cash Coin Mixing Protocol, Comes From A Chilling Explanation
Source: few

If community members instinctively knew how dangerous this ruling was to privacy, there would be more ramifications to consider, Balthazor said.

Risks of immutability and decentralization

Privacy may be the first and most obvious casualty of the Tornado Cash ruling, but that’s not the only challenge emerging from the case. The immutability of blockchain and smart contracts is also at risk.

“This liability theory makes immutable smart contracts too risky for developers to make publicly available,” Balthazor said.

“Reducing risk to developers may require that publicly available software be modifiable so that software developers can respond to law enforcement or regulatory requirements.”

“For example, some stablecoin issuers have a feature that allows the stablecoin to blacklist blockchain addresses controlled by sanctioned entities. Failure to include such a feature would increase the risks to issuers of their stablecoins used by sanctioned entities, he said.

Belhazur concluded that the ruling “increases the risks associated with decentralized projects” because “its decentralized nature may make course correction difficult due to the consensus needed to make significant code changes or operational changes.”

Converting bolts

With Burtsev receiving such a punitive penalty, it is understandable that blockchain developers are now concerned about potential legal action.

Latka said that “compliance by design” will become “critical for developers and institutions in the cryptocurrency space.” This includes integrating regulatory compliance into the design and development process from the beginning.

This is because “courts will assess whether developers knowingly created tools for illegal purposes or were willfully blind to their misuse, with evidence of intent or negligence significantly impacting the legal outcome.”

But if developers have to sacrifice privacy, immutability, and decentralization to protect themselves and make their protocols compatible by design, what will be left of blockchain?

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