US crackdown against privacy tech continues with arrest of Samourai Wallet developers
Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.
Yesterday, news broke that the United States Department of Justice has charged the Samourai Wallet co-founders with “conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmitting business.” Authorities seized the Samourai website and arrested both founders. Samourai Wallet is a Bitcoin wallet that uses so-called Coinjoin technology to mix transactions. This technology makes Bitcoin transactions anonymous. Typical users for mixer wallets are privacy enthusiasts and anyone who does not want their Bitcoin transaction to be visible to all on a public ledger. However, criminals, including North Korea’s infamous Lazarus Hacker group, are also common users. The case is similar to the arrest of the founders of Tornado Cash. Tornado provides similar mixing services for Ethereum users. The founders Roman Storm, Alexey Pertsev and Roman Semenov have also been indicted by US authorities.
The battle-lines are clearly set out. On the one hand, the privacy community which argues that writing code is free speech. On the other hand, the state which sees encryption as a threat. There are many completely legitimate use-cases for privacy technology. Vitalik Buterin famously used Tornado Cash to donate to Ukraine. Others may just not want their transactions to be fully public. The argument goes further. Is Google to blame if criminals use their search engine to do research for their crime? Or is Telegram to blame when criminals use it for communication?
The question over which courts will have to decide is the extent to which writing code and making it available counts as a crime. The case is reminiscent of the early days of the internet. Phil Zimmermann, an American cryptographer, made his ‘Pretty Good Privacy’ programme available for download in 1991. The government subsequently charged him for violating the Arms Export Control Act because of making encryption technology public. The case was later dropped.
It seems that the government’s case will hinge on whether prosecutors can demonstrate that Samourai Wallet and Tornado Cash founders directly enabled and benefitted from criminal actions committed through their platforms. But expect both cases to go through courts for a long-time. In the meantime, zero-knowledge encryption might prove to be the solution to a lot of these questions. It will allow users to prove that they have not interacted with certain criminal wallets, but keep their transaction private. Until this becomes possible, there will still be some privacy battles with governments left to fight.