Tornado Cash: sanctions vacated, developer conviction

At DevConnect 2025, Sebastian and Friederike speak with Peter Van Valkenburgh about the rapidly evolving battle for digital rights. Peter challenges the industry's comfort with transparency, arguing that "transparency will destroy neutrality." He uses the history of SWIFT to illustrate how a once-neutral messaging system was captured by geopolitical interests because it wasn't "technically blind" to the data it processed. He argues that for blockchains to survive as global settlement layers, they must be "actually blind" to transactions, making neutrality a technical reality rather than a policy choice.

The conversation turns to the aggressive legal tactics currently deployed against developers. Peter highlights the Pereira Bueno case, where prosecutors charged MEV searchers with wire fraud for being "dishonest validators" a concept Peter argues completely undermines the game-theoretic security of permissionless networks. He also breaks down the mixed bag of Tornado Cash litigation. While the sanctions against the protocol were successfully challenged and invalidated for Americans, the criminal conviction of developer Roman Storm for "unlicensed money transmission" sets a terrifying precedent for anyone publishing open-source code.

On a constructive note, Peter introduces Coin Center's "John Hancock Project," which advocates for replacing the current, ineffective KYC/AML regime (which seizes less than 1% of illicit funds) with a system based on privacy-preserving attestations and self-sovereign risk scores. Finally, Peter shares surprising optimism regarding the US Securities and Exchange Commission (SEC). He notes that under the influence of Commissioners Hester Peirce and Paul Atkins, the agency has shifted from an aggressive adversary to a potential ally, openly discussing the benefits of full asset tokenization and the constitutional necessity of financial privacy.

Topics

• 00:00 The Telegram vs. Signal security rant
• 05:15 The "Transparency Paradox": Why transparent Layer 1s cannot remain neutral in the long run

• 10:40 The SWIFT Analogy: How a neutral messaging layer became a politicized settlement enforcer

• 15:50 The Pereira Bueno Case: Why labeling MEV strategies as "wire fraud" threatens all validators
• 23:10 L2 Sequencing Risks: Centralization and the need for "dumb pipes"
• 28:30 The Failure of KYC: Why 99.8% of illicit funds are missed and the cost of mass surveillance
• 35:00 The "John Hancock Project": Using ZK-proofs and attestations to replace identity surveillance
• 42:15 Tornado Cash Update: Sanctions invalidated vs. the dangerous precedent of Roman Storm’s conviction
• 49:00 The SEC's 180: Hester Peirce, Paul Atkins, and the push for tokenized equities

Links mentioned in the episode:

• Gnosis: https://gnosis.io/
• Coin Center: https://www.coincenter.org
• Epicenter - All Episodes: https://epicenter.tv/
• Report: Tear Down This Walled Garden: https://www.coincenter.org/tear-down-this-walled-garden/
• Pereira Bueno Amicus Brief: https://www.coincenter.org/amicus-brief-mev-wire-fraud/
• Peter on X: https://x.com/valkenburgh
• Sebastian on X: https://x.com/seb3point0
• Friederike on X: https://x.com/tw_tter

Sponsors:Gnosis: Gnosis has been building core decentralized infrastructure for the Ethereum ecosystem since 2015. With the launch of Gnosis Pay last year, we introduced the world's first Decentralized Payment Network. Start leveraging its power today at http://gnosis.io