A business professor, Omid Malekan, made donations to Planned Parenthood and Russians secretly aiding Ukrainian refugees. He made them using Tornado Cash, the recently sanctioned privacy application for blockchain transactions, to protest the U.S. Treasury.
Why it matters: The right to transact freely is personal to Malekan. “I am originally Iranian. One of the reasons my family immigrated to America was because of the kinds of rights here that you don’t get many other places,” he said.
Context: Since the application has been sanctioned, Malekan, as a resident and citizen of the U.S., may have broken the law by using the service.
- Tornado Cash hides who the sender and receiver is in an Ethereum transaction.
Go deeper: In his new book, Re-Architecting Trust, released in July, Malekan argues that by using the financial system to advance its foreign policy goals, the U.S. could be driving crypto adoption in many other places.
What they’re saying: Financial companies have to “assume everyone is a money launderer, drug dealer or tax evader. And then they have to go through this risk based process and make sure you are not,” Malekan explains.
- Rules around anti-money laundering has turned finance “into one of the few industries that is built on a presumption of guilt,” he says.
- No one checks to make sure you never shoplifted before letting you enter the supermarket, he said.
Yes, but: As we all know, Chainalysis estimated that something like $14 billion in illicit funds moved over the blockchains in 2021.
- Meanwhile, the UN estimates that there could be $2 trillion in money laundering annually, across the globe.
But to Malekan, the cost of fighting this losing battle is shutting people out of the financial system. It’s the poorest and the most marginalized who can’t get approved to use it, he says.
- “To me it’s like the war on drugs. We spent a lot of money, but we didn’t stop people from getting drugs,” he says.
In the weeds: Malekan didn’t retain an attorney in advance of making his protest, but he did talk to a couple of attorney friends informally. “They agreed that the chances of the government actually prosecuting me for anything were low, but also they weren’t zero,” he says.
Be smart: Malekan doesn’t think most people realize how transparent crypto is, compared to banks. When every transaction you’ve ever made from one address is pubic online (from every serious bet on a market move to every goofy NFT).
- “This is why a service like Tornado Cash in the context of crypto has a million different benign uses,” he said — here are some examples.
What he’s watching: “I think the ramifications for non-crypto people is actually bigger than for crypto people, because we have now crossed the line from people who deal with sanctioned companies or governments to criminalizing the act of seeking privacy,” Malekan said.