CEO and Founder of Shapeshift Erik Voorhees recommended that the MakerDAO community take precautionary measures after the US Treasury sanctioned Tornado Cash.
Specifically, Voorhees advised MakerDAO users to withdraw their USDC collateral and convert the funds to another stablecoin. But he stopped short of advocating a more censorship-resistant choice.
You have a little time to do this, but you have to start.
— Erik Voorhees (@ErikVoorhees) August 8, 2022
On August 8, the US Treasury issued a press release stating that crypto mixer Tornado Cash has been sanctioned for its role in laundering illicit crypto funds worth over $7 billion since 2019. The Under Secretary of the Treasury for the Terrorism and Financial Intelligence, Brian E. Nelson said:
“Despite public assurances to the contrary, Tornado Cash has repeatedly failed to impose effective controls designed to prevent it from routinely laundering funds to malicious cyber actors and without basic measures to address its risks.”
The incident sparked discussions about government overreach and alternatives to centralized stablecoins.
The end of Tornado Cash
The Tornado Cash website is offline, its developers have been booted from GitHub, and Circle has blacklisted USDC addresses belonging to the organization following the sanctions.
Several months earlier, Circle CEO Jeremy Allaire dismissed claims that the company could freeze USDC accounts for any reason as FUD. He further countered by implying that entities operating within the law have nothing to fear.
Coin center released a statement on the matter, saying that sanctions against a tool, rather than a person or entity with an agency, are a blow to people who want to maintain their privacy, “including for reasons otherwise entirely legal and personal.
“It seems rather to be the sanction of a tool that is neutral in nature and can be used for good or bad like any other technology.”
This point has been widely supported by members of the crypto community, who see the sanctions as an attack on personal sovereignty.
Big Brother is watching
The founder of Bankless, ryan adamschimed in by calling the US Treasury actions “the first shot in big brother’s assault on crypto.”
In a later tweet, Adam also posed the question, where will it end? Suggesting that Uniswap could be next, then Ethereum – further insinuating the tiptoe of totalitarianism.
“If software isn’t safe, then speech isn’t.”
In response to the USDC censorship, a researcher from the NEAR Protocol DeFi Proximity platform, @resdegenproposed the development of a new decentralized stablecoin without government guidelines.
Resdegen considers Reflexer’s Rai and Liquidity’s LUSD to be 100% decentralized, but both are collateralized, which is disadvantageous in terms of scalability. Resdegen suggested developing a new project that would be indexed algorithmically using BTC or ETH derivative contracts.
I highly recommend reading about them (Vitalik is a big supporter of RAI)
However, being collateralized stablecoins means that their scalability depends on the market capitalization of ETH
— Res ®️ (@resdegen) August 8, 2022