Hurricane rips through cryptocurrency Politico

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With the help of Derek Robertson

This week, the cryptocurrency world is grappling with new penalties against Tornado Casha blockchain tool sometimes used by hackers — including, allegedly, a notorious North Korean group — to launder cryptocurrency.

While the Treasury routinely imposes penalties on cybercriminals, the measures introduced on Monday are something new. It appears to be the first attempt to penalize lines of code running on a decentralized network. This is a test of governments’ ability to apply existing enforcement tools in the crypto ecosystem.

At the same time, the sanctions expose a deep rift within the crypto world between believers in the technology’s original libertarian spirit and industry participants keen to show that crypto companies can be responsible citizens.

Let’s break down what happens, and what happens next.

These penalties are different.

This is not the first time that the Treasury Department has issued penalties related to cryptocurrency. In April, it sanctioned another shuffler – a tool that allows people to obfuscate the source of their crypto holdings – used by North Korean hackers. Like countless other sanctions targets, this mixer was a centrally controlled entity.

Tornado Cash is also a mixer. But it is a decentralized protocol that runs on the Ethereum network. So it is unclear exactly how the sanctions will be applied.

Indeed, someone has already taken it upon himself to point out the incompatibility between the existing penal rules and the decentralized protocol.

Sanctions rules prevent anyone from entering into transactions with Ethereum addresses used by Tornado Cash. But since it is an automated tool, anyone with the requisite technical expertise can still use Tornado Cash to send cryptocurrency to any Ethereum address, whether the recipient wants to or not.

In the wake of the sanctions announcement, an anonymous blockchain user sent Ether to the addresses of prominent personalities, such as world-famous DJ Steve Aoki. Recipients of these spam transactions have no way of blocking them, but they could technically be at odds with the Treasury as recipients of cryptocurrency from a sanctioned Tornado Cash address, with little recourse under the law as written.

“The only escape valve is the attorney general’s discretion,” said Peter Van Valkenburg, director of research at CoinCenter, a crypto advocacy group that opposes the new sanctions.

The response is also exacerbating divisions in the crypto world.

On the one hand, executives yearn to be on good terms with government agencies. On the other hand, there are true believers who want to realize the blockchain’s potential for privacy and decentralization that challenges authority.

Several central entities, such as the code repository Github and the stablecoin issuer circle, have responded to the sanctions by suspending accounts and freezing assets linked to Tornado Cash. On the other hand, many crypto advocates have condemned the Treasury move as a dangerous overreach.

An employee at a crypto trade group refused to address the recorded penalties at all, saying the matter had split the group’s membership, with a heated discussion in the members-only group chat on crypto messaging app Signal.

Sanctions can have unintended consequences.

Crypto watchdogs expect them to spur more interest in technical innovations that allow blockchain networks to become more secretive – like Zero-knowledge proofs, used by Tornado Cash itself – and decentralized than it really is. In other words, less vulnerable to future government sanctions.

“This is going to escalate quickly,” Van Valkenburg said.

It is still somewhat ambiguous regarding legal asylum It happens in humans when AI causes harm – just like when it does falsely accusing people Unemployment fraud, or discriminate against protected categories. in new report From the University of California Berkeley’s Center for Long-Term Cyber ​​Security, a Berkeley researcher looks at the potential risks posed by current AI applications and makes some recommendations (many of them related to clarifying legal code) on what to do:

  • Create broad, specialized ombudsmen to mediate disputes between people and companies that deploy AI
  • Make the law clearer when it comes to how people affected by decisions made by AI can file a complaint or take legal action.
  • Engage directly with marginalized communities to learn how they may or may not be affected by AI-led decisions

Ifejesu Ogunleye, the author of the report, wrote that “the characteristics of AI systems often reduce the effectiveness” of existing legal redress systems, and that without targeted regulatory action, such as The European Union is currently takingThose most vulnerable to damage may suffer more. – Derek Robertson

What is “entertainment” anyway?

This Morning Balaji Srinivasan, Web3 Guru and Network State authorexpressed optimism about the possibility ofInfluencers in artificial intelligence“to replace the current entertainment landscape powered by social media (which in turn replaced the Kardashians’ world of cable TV and others).

The idea is that AI-generated “characters,” backed by data about what users actually like, will be able to satisfy this need more reliably than can human imagination, essentially making guesses by comparison — cited the author of the Srinivasan post put it, “Fully customized content created. “

But there is a huge gap here when it comes to understanding “entertainment” itself. An AI-generated Tom Cruise clone, like Srinivasan, might be as “fun” as it gets our attention, yes. But maybe it’s just fun because Do you know who Tom Cruise is?and love it A symbol of human creativity and ingenuity Embodiment in his films dating back to the era of the eighties. Computer-generated entertainment will certainly play a role in our future, but there is no precedent for artificial intelligence yet Create a star rather than just maintaining, or simulating, those that already exist. – Derek Robertson

Stay in touch with the whole team: Ben Shrekinger ([email protected]); Derek Robertson ([email protected]); Konstantin Kakays ([email protected]); and Heidi Vogt ([email protected]). Follow us on Twitter Tweet embed.

Ben Schreckinger covers technology, finance, and policy for POLITICO; He is an investor in cryptocurrency.

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