“The blockchain provides us with an amazing opportunity to track the flow of money”, an agency head said in an AMA session on Reddit. The US Secret Service is a federal law enforcement agency primarily charged with protecting US political leaders, but it’s also tasked with safeguarding the financial system and fighting financial crime. The hosts also advised on how to keep transactions hidden from the authorities. The only viable way of securing secrecy in financial settlements turns out to be cash, they say.

    • @A1kmm@lemmy.amxl.com
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      711 months ago

      Governments have battled the use of zero-knowledge crypto for anonymity before, and they were kind of successful in their goals.

      Consider Tornado Cash, a protocol / Ethereum contract that uses zero-knowledge proofs (zk-SNARKS) to obscure the trail of crypto transfers to provide privacy, by breaking the link between deposits and withdrawals, while requiring proof that withdrawals don’t exceed deposits for a keypair / account (similar to Monero’s Traceable Ring Signature based approach but more generic).

      It has legitimate purposes - without it, the pseudonymity of Ethereum is not very private - if someone pays you in crypto, they can work out what you spend it on, and people who you spend money with can easily work out where your money came from and what you spent it on. So protocols like Tornado Cash don’t give anything too radical - just privacy similar to cash, that normal ordinary people should use as a matter of course. Of course, it is dual purpose as it is also useful to criminals.

      The US government sanctioned the protocol / smart contract, and the developers (https://home.treasury.gov/news/press-releases/jy0916), making it illegal for businesses within the reach of the US government to do business with anyone in relation to funds that have passed through the protocol, as well as shutting down hosting of project resources. Dutch authorities arrested Tornado developer Alexey Pertsev and held him for almost a year just for developing the Tornado Cash protocol and software implementation.

      There are serious questions about the legality of both the US and Dutch actions - US sanctions law is apparently supposed to be about sanctioning people and organisations, not technologies, and arresting (or sanctioning) people solely for designing something with legitimate purposes because someone else used it for illegal purposes is not the status quo. If that is really the precedent, the US should designate any design of firearm which is used in a homicide as a ‘sanctioned entity’, so that anyone touching one is guilty of interacting with a sanctioned entity. But for now, Tornado Cash is essentially unusable.