Legacy Media Wants Crypto Brought to Heel

A smug and sycophantic article in The Atlantic magazine celebrates the Treasury Department’s blacklisting of Ethereum coin mixer Tornado Cash in August, arguing it’s evidence that crypto is not censorship resistant and that the crypto industry will fall in line with whatever regulations governments dish out.

In this day and age it’s not unusual to find mainstream and legacy journalists advocating for censorship, but this is particularly egregious as this is the censorship of source code, something protected by federal case law. Further, the argument fails under the weight of its own premise when they admit that the industry is, in fact, fighting back against these government sanctions.

A few crypto leaders are not backing down. Buterin, more a technologist than a company man, is on record as saying he would opt to punish validators who comply with the sanctions. Coinbase CEO Brian Armstrong, arguably the most influential executive in the American crypto sphere, has said the same of his company’s validators; yesterday, the exchange announced that it’s bankrolling a lawsuit against the U.S. Treasury over the sanctions. When Ethereum upgrades later this month, Coinbase will control an estimated 15 percent of the market for the network’s validation process, making it one of the most powerful individual actors in the system. Shutting down a portion of a business that’s poised to create major gains for Coinbase, especially on the heels of a particularly bad quarter, would be borderline disastrous. (A spokesperson for Coinbase pointed me to a webinar it hosted to discuss the fallout of the sanctions, but declined to comment further.)

And as The Block points out, the industry is rallying against the Tornado Cash sanctions.

Several employees of leading crypto exchange Coinbase are filing suit to roll back last month's Tornado Cash sanctions. Coinbase itself is financially backing the suit. 

The lawsuit centers on a novel argument: Whether the U.S. government can target recurring code for national security purposes. The employees filed their suit in the U.S. District Court for the Western District of Texas. 

“People, or entities, or properties are fair game. Code is not,” Paul Grewal, Coinbase‘s chief legal officer, told The Block. 

…

Coin Center, a non-profit advocacy group, has also said that it’s preparing its own court challenge. But Coinbase was the first to take the unusual step of an American company challenging Treasury sanctions. 

One “attack” by Treasury against Tornado Cash is not a signal that the battle for decentralization and censorship resistance is over. We believe that, to borrow a famous phrase, it’s actually a sign that the crypto industry has not yet begun to fight.