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Crypto in peril as court ruling sets a dangerous precedent

Crypto in peril as court ruling sets a dangerous precedent

On May 14, a Dutch court sentenced Alexey Pertsev, developer of Tornado Cash, to five years in prison. This unprecedented ruling can create a dangerous precedent for cryptocurrency and privacy development, challenging previous worldwide regulatory knowledge.

In a surprising development, Alexey Pertsev was convicted of money laundering—not because he directly laundered money, but because he developed and maintained an open-source and permissionless privacy tool on Ethereum (ETH) that a minority of users allegedly used for criminal activities.

Notably, the Dutch court estimates that 84% of all transactions in Tornado Cash were non-criminal, according to a report by FreedomTech. This has outraged the crypto and privacy communities, as experts warn of a dangerous precedent that could harm the industry.

According to multiple sources, most open-source protocols and applications could become a target following this ruling’s logic. 

Experts warn of dangerous precedent from Tornado Cash’s Dutch ruling

In this context, independent journalist and privacy advocate Lola Leetz deemed the Tornado Cash verdict “completely insane.” In a thread posted on X, Leetz explained the consequences of the Dutch ruling and how it changes developers’ accountability.

As described, “open-source developers building non-custodial tools can be held responsible for criminal activity when criminal actors cannot be stopped or deanonymized.” Leetz also explained that this laid out software development as criminal intent. Moreover, the journalist classifies Tornado Cash as a communications service despite the court ruling otherwise.

The open-source development and privacy hub FreedomTech made a similar thread that delves into more details of the Tornado Cash ruling on the Netherlands.

Essentially, the thread argues that Pertsev could not stop the illicit use of his tool and highlights that it even implemented compliance features according to the known regulations at that time.

What is next for crypto and privacy developers?

Interestingly, Joel Valenzuela – responsible for business development and marketing for Dashpay – warned of privacy being “under attack.” Valenzuela mentioned other regulation and enforcement events that fall in a similar category to Alexey Pertsev’s sentencing.

In particular, the arrest of Samourai Wallet developers, Wasabi Wallet’s leaving the United States and then shutting down, privacy coins’ delistings, and peer-to-peer crypto exchange platforms’ shutting down.

Nevertheless, the content creator highlighted privacy as a human right and a normal attribute to seek. According to him, cryptocurrency users should focus on using privacy by default for everyday transactions, like “buying a coffee.”

Joel also said developers should avoid being in the U.S. and Europe while remaining anonymous for safety concerns. 

In conclusion, the Dutch court’s ruling against Alexey Pertsev sets a troubling precedent for cryptocurrencies and privacy. This decision undermines the role of developers in creating open-source, non-custodial tools.

Experts warn that targeting developers in this way threatens innovation and privacy rights. The case has agitated the crypto community, emphasizing potential widespread implications for similar technologies.

Developers and privacy advocates continue to voice their concerns, pointing out the ruling’s broader impact on privacy and online freedom. Moving forward, the industry must navigate these new legal challenges carefully to protect privacy and foster innovation in the digital space.

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